Questions on MGNREGA budget estimation

How the Centre’s approach has eroded the very premise of MGNREGA 

February 22, 2022 12:15 am | Updated 12:46 am IST

Women renovate a children’s park as part of The Mahatma Gandhi National Rural Employment Guarantee Act in Kancheepuram district.

Women renovate a children’s park as part of The Mahatma Gandhi National Rural Employment Guarantee Act in Kancheepuram district. | Photo Credit: VELANKANNI RAJ B

The disappointing allocation for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in the FY 2022-23 budget has created a buzz. Organisations such as the All India Kisan Sabha and NREGA Sangharsh Morcha (NSM) have raised concerns about the inadequacy of the amount. Grassroots activists and academics have been demanding higher budgetary allocations for MGNREGA; yet, the actual allocations have been considerably lower and severely inadequate to meet needs. The initial allocations in the past two FYs have been just about half of what was recommended by groups like the People’s Action for Employment Guarantee (PAEG) and NSM.

Consequently, the consistent shortage of funds has caused a situation endemic to MGNREGA — that of deficits for State governments, long delays in wage payments, decline in the work provided in the last two quarters of the FYs, and significant pending dues at the end of the FYs. In FY 2021-22, a tracker released by PAEG showed that the initial amount allocated was nearly exhausted by September, and many States were running a negative balance. For FY 2022-23, PAEG had recommended a minimal allocation of ₹2.64 lakh crore, and NSM had recommended ₹3.64 lakh crore, but the government has allocated only ₹73,000 crore. In its recent statement, NSM has argued that this amount provides for only 16 days of employment to all the active job card-holding households.

Why is the government’s allocation so much lower than what State governments ask for and civil society actors recommend? This question merits scrutiny of the way the government estimates persondays. A closer look at the Centre’s MGNREGA budget estimation in FY 2021-22 sheds some light on this.

Projected persondays

Among other things, the budget calculations depend on two important variables: the projected persondays for the coming year, and the wage rate. Projected persondays are the total days of work anticipated for the year. The District Programme Coordinator is responsible for calculating this and submitting it to the State, which in turn collates the entire State’s projected demand and submits it to the Centre for approval. The MGNREGA MIS Report R2.2.2 has the monthly projections approved by the Centre, along with the actual persondays generated. A closer look at these figures for the last two years reveals some discrepancies. In FYs 2019-20 and 2020-21, the persondays generated was about 18.4% higher in Q4 when compared to Q3. However, the projected persondays for Q4 in FY 2021-22 appeared to be strangely and significantly lower than that in Q3. FY 2020-21 was an unusual year, with the pandemic and the subsequent lockdown measures leading to significantly increased MGNREGA work demand. Work demand continued to be high in FY 2021-22 as well, implying that the rural population was still relying on MGNREGA for their livelihood. For the first three quarters, persondays generated this year were only 7% lower than the persondays generated in the same time period last year. And yet, as on February 3, 2022, the projection for the last quarter of this year was only about 40% of that for the same period in the previous year. There seems to be no clarity on how this projection was arrived at, given previous trends, and given that with the harvest concluding MGNREGA work has traditionally picked up in Q4. However, what it does suggest is that the government had not revised its projections for the final quarter of this FY even while it announced supplementary grants worth ₹25,000 crore for MGNREGA in December 2021.

There have been attempts by the government to curb work demand based on the availability of funds. In 2016, for instance, Business Standard reported that the Rural Development Ministry was unofficially communicating to States to cut down on MGNREGA work because funds were running out. Since budget allocations are based on projected persondays, underestimated projections will lead to inadequate allocation. The unusually low projections of the final quarter in the current FY certainly contributed to the supplementary allocation of only ₹25,000 crore, when activists had been demanding an additional allocation of at least ₹50,000 crore. The low allocation for FY 2022-23 is also likely to be an outcome of artificially low persondays projections.

Wage rate

The official MGNREGA wages also contribute to keeping the budget low. Despite a clear mandate of the MGNREGA Act that the wage remuneration cannot be lower than the minimum wage in each State, the former remains much below the latter. In doing so, the Central government has violated the provisions of the Act, as well as the fundamental rights of MGNREGA workers. There have been estimates devised of what the average MGNREGA wage should be. For instance, an expert committee under the chairmanship of Anoop Satpathy estimated a need-based national minimum wage of ₹375 per day as of July 2018. In comparison, PAEG used a conservative estimate of ₹269 per day in its recently released pre-budget brief. However, according to the NREGA ‘At a Glance’ report, the average MGNREGA wages paid this year remain at a meagre ₹209 per day, and the low allocation for next year indicates that the wage will not be increased by much, if at all.

However, even if we take the wage rate of ₹209 per day that the government is paying on average, the current FY is expected to end with dues of over ₹20,000 crore. The Central government’s expenditure for this FY is expected to be over ₹1.02 lakh crore even if the wage bill, material costs, and administrative costs are to increase in a linear fashion till the end of the FY. The pending dues for previous FYs add up to over ₹17,000 crore. Adding the two figures, the government’s estimated expenditure will be ₹1.19 lakh crore by the end of this FY. And yet, the government has allocated only ₹98,000 crore (₹73,000 crore in the initial budget plus ₹25,000 crore as supplementary grants) for the FY. In such a likely scenario, only ₹53,000 crore will be available for expenses in FY 2022-23. In fact, since FY 2016-17, 20% of the initial budget allocation has gone into clearing pending dues.

Correcting for the mentioned discrepancies, PAEG recommended a minimal budget of ₹2.64 lakh crore for FY 2022-23, considering only the households that were active this year. However, even this number is much lower than the number of households that are registered under the scheme. MGNREGA treats employment guarantee as a legal right; any rural household can demand work up to 100 days every year, and the government has to provide it. As and when demand arises, the government must fulfil it. In this context, treating the budget allocation as a ‘ceiling’ to the work that can be provided erodes the core premise of the scheme. To illustrate, less than 5% of households active this year have completed 100 days of work. While an initial budget allocation has to be made, MGNREGA funds must be regularly replenished by supplementary grants provided based on actual work demand in each State. The Centre’s approach to estimating projections, keeping the wages illegally low, and treating the budget as an upper limit to the work that can be provided has eroded the very premise of MGNREGA.

Anuj Goyal ( and Laavanya Tamang ( are members of the People’s Action for Employment Guarantee

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