Govt may pump more funds into NREGS to boost rural economy
The Hindustan Times,
October 27, 2019
The government has already spent nearly 80% of its full-year budget for the flagship rural job guarantee programme, top officials said on Friday, and is staring at a situation where it has to infuse more money into it to revive a stuttering rural economy in the face of a potential cash crunch.
As demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has surged, which analysts said pointed to a worsening of rural distress amid an economic slowdown, the job programme has already generated 150 crore persondays of employment in the fiscal year as of October 25. That compares with 268 crore persondays in the entire last financial year, official data showed.
Many analysts have underlined that the BJP’s below-par performance in the Maharashtra and Haryana assembly elections reflected concern, among other factors, about the economy, which slumped to a growth rate of 6% in the three months to June 30, the slowest pace in over six years. Earlier this month, a study by Nielson showed that consumption of packaged consumer goods had hit a seven-year low in rural India.
The job surge under MGNREGS, which assures at least one member of every rural household at least 100 days of manual work a year, has exhausted Rs 50,000 crore of the Rs 60,000 crore allocated to the programme in this year’s Union budget. The Rs.50,000 crore includes arrears of Rs.15,000 crore owed from last year, officials said.
“We have roughly Rs 10,000 crore left to manage the October-November period, before additional funds come through the first supplementary demand for grants,” said an official, who didn’t want to be named. The rural development ministry has demanded an additional Rs 20,000 crore which would be spent mostly on MGNREGS.
Sixty percent of funds allocated to MGNREGS must go to agriculture and allied activities. The scheme completed 10 years in 2016. Persondays of work generated under the MGNREGS scheme, an indicator of demand for employment among the poor, rose to an eight-year-high of 2.68 billion in 2018-19 from 2.33 billion the previous year, a rise of 15%. Government officials also indicated that discussions are underway to hike MGNREGS wages by revising the base year of Consumer Price Index- Agricultural Labour (CPI-AL), an index that determines the MGNREGS wages.
“Initially the plan was to replace CPI-AL altogether with CPI-Rural. In CPI-AL, 72% of the weightage is given to foodgrains. But as a large section of the rural population is under the Food Security Act, the food prices have remained low in rural households. But in the CPI-Rural, food is given 54% weightage.” a second official said.
“But as the base year of CPI AL is being revised from 1986-87 to 2019-20, the PMO {Prime Minister’s Office} maintained that it would be better to stick to CPI-AL as it would lead to better wage revision,” the official added
Given that MGNREGS is a demand-driven programme, the government will definitely meet the additional requirement for funds but it might also slash the allocation made to some other schemes such as rural roads or the housing programme, a third official said.
MGNREGS wages fixed by the government are currently lower than wages in the private labour market. For instance, the wage under the programme in Uttar Pradesh, India’s most populated state, is pegged at Rs 181 a day, while the market rate is about Rs 250.
“That people in rural areas are willing to work for 60% of the market wage under MGNREGS and that there is a great demand for MGNREGS work just goes on to show how bad the rural distress is. It also points to lack of employment generation,” said economist Himanshu, who teaches at Jawaharlal Nehru University.
According to Himanshu, the rural development ministry should demand Rs 60,000 crore more because the government will need at least Rs 120,000 crore to fund MGNREGS for the full year. He added that the wages should also be doubled to align it with market rates.
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