What is it?
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme has been allocated ₹60,000 crore in the Budget for 2019-20. It is less than what was spent on the scheme in the current year, that is, the revised estimate for 2018-19, which stands at ₹61,084 crore. In his Budget speech, Finance Minister Piyush Goyal noted: “Additional amount would be provided, if needed.” The original 2018-19 Budget allocation for the scheme, a lifeline for landless labourers and rural workers, was ₹55,000 crore. However, by the end of 2018, 99% of the funds had been exhausted. A number of States already had a negative net balance. The activists protested that people were being denied work in several States. The Rural Development Ministry, which administers the scheme, asked for a supplementary allocation and was granted ₹6,084 crore in early January, taking the revised estimate for the year to ₹61,084 crore.
How did this come about?
A look at the funding patterns over the last decade shows this is not the first time allocations for the scheme are lower than what was spent in the previous year. In most years, supplementary allocations later in the year have ensured that the final amount spent has risen at least incrementally each year. However, the revised estimates for 2012-13 were actually lower than the previous year, while the amount spent in 2014-15 was exactly the same as in the previous year. When MGNREGA funding is adjusted for inflation, a bleaker picture appears, making it clear that both the UPA and NDA governments have short-changed the scheme for several years now. In 2011-12, the revised estimate was ₹31,000 crore. For the next four years, the inflation-adjusted amount spent on the scheme was lower than ₹30,000 crore in 2011 terms. The current allocation of ₹61,084 crore drops to just ₹41,013 crore in 2011 terms, when adjusted for inflation using the Consumer Price Index for rural labourers.
Why does it matter?
Rural workers are being discouraged from registering with the scheme, being denied work even when they do register, and are facing long delays in payment of wages even when they do get work. Researchers, activists and elected representatives blame this on the lack of sufficient funding. The promise of the MGNREGA is to enhance livelihood security by providing at least 100 days of wage employment a year to households that want it. If work is not provided within 15 days, applicants are entitled to an employment allowance. Thus, work is a legal entitlement under the scheme and funding should be demand-driven.
However, researchers have found a widening gap between demand and supply of work. A study of 3,500 panchayats in 2017-18 found that the employment provided was 32% lower than the work demand generated. Researchers calculated that in order to meet the registered work demand last year, the scheme should have had an allocation of ₹76,131 crore. Workers are also facing weeks- and months-long delays in payment of wages, often without compensation. Finance Ministry documents admit that one of the causes is the non-availability of funds.
What lies ahead?
The future funding situation is bleak, given that the government’s “highest ever allocation” tag disguises the pending liabilities. If the total allocation of ₹61,084 crore had come through on the budget day, the scheme would still have a negative net balance of ₹3,270 crore, according to its financial statement on February 1. The next two months are the peak season, and workers have been promised an additional 50 days of work in drought-hit areas. Researchers predict that the deficit could grow as high as ₹12,000 crore by the end of this financial year. With Central money running out, States have also been asked to use their own funds to pay workers over the next two months, with the promise of an April refund. These deficits and liabilities will eat into the allocation for next year, slashing the amount available for new works in 2019-20.