Demand For MGNREGA Work Remains Elevated Amid Budget Constraints
Demand for work under India's rural jobs guarantee programme fell in August compared to a month ago. The drop, however, may not signal an improvement in economic conditions, instead reflecting seasonal shifts in work patterns and a cash crunch across the flagship scheme.
According to data available on the official MGNREGA portal, 2.5 crore households demanded work in August 2021—the lowest since November last year. This was a decline of 22.9% from the previous month.
Demand for work in August was at the same level as a year ago and well above what was seen during the comparable period in 2019.
August is a lean month for MGNREGA, said Chakradhar Budha, research consultant at LibTech. February-July is typically peak season for demand for work under the scheme.
Demand is limited for a combination of reasons, he said.
The sowing season is underway and, with other options available, people choose those because they offer daily and higher wages. "It zeroes down to 100 days of guaranteed work under the scheme that people want to use judiciously," he said. "Also, the kind of work that is carried out under the scheme also takes a hit because of the monsoons."
Demand-Supply Gap Persists
Alongside demand, supply of jobs fell as well.
Employment was provided to only 1.6 crore households compared to 2.7 crore households last month.
To be sure, as per the scheme's website, data for employment provided is subject to sharper revisions in subsequent days even as statistics on demand for work remain relatively stable.
According to Budha, the limited supply may itself be a reason for lower demand. A number of states have or are close to exhausting budget under the scheme, Budha said.
According to the website, 17 of the 33 states and union territories are already in 'negative net balance' — an indication of funds remaining with the states after adjusting expenditure and payments due from total fund availability.
Andhra Pradesh topped on both accounts.
Budha said construction is a major employment generating industry in the state. Currently, because of the government's changes to the sand mining policy, construction activity has taken a hit, forcing more people to rely on MGNREGA. "Pending wages in the state are at an unprecedented high," he said.
West Bengal, Tamil Nadu, Karnataka and Madhya Pradesh were other states that had a high negative net balance and a wide demand-supply gap.
Uttar Pradesh, despite a wide gap in demand and supply, continued to remain net balance positive.
Nikhil Dey, social activist and founder member of the Mazdoor Kisan Shakti Sangathan, said every time there is a freeze on wages, demand drops. "There is a direct correlation between wage payments due and the demand for work in the scheme," he said.
Payments under the scheme are released in tranches by the central government. Once the current availability of funds is exhausted, the centre has to release more money. But, this means, that until it does, people are not being paid, Dey said. "States have to follow up with the central government and officials are directed to go slow on work."
Budget Running Out
The crunch in financing the scheme is evident even at the aggregate level.
The government had allocated Rs 73,000 crore for the scheme for FY22, compared to a revised budget of Rs 1.1 lakh crore in FY21. This was before the onset of the second wave of Covid-19 infections.
A fall in the supply of jobs, states' negative balance, lack of signaling from the government to prioritise the scheme, does not bode well for rural distress, said Yamini Aiyer, president and chief executive of the Centre For Policy Research. With the erratic progress of the south-west monsoons this year, absorption of employment in agricultural activity might have been lower than last year, she added.
Amit Basole, who heads the Centre For Sustainable Employment at Azim Premji University, said while this year isn't as bad as last year, there's still need for support. There is still accumulated stress and what has happened to informal job market is still hard to determine. As such, "there is definitely a strong case for government spending to remain strong and steadfast by way of MGNREGA or otherwise," he said.