Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme, a significant initiative by the Government of India, is reportedly on the brink of a financial crisis. As per the scheme’s financial statement dated 26th January, 2020, the central government has nearly exhausted the funds for the programme. The data reveals that more than 96% of the allocated funds have been expended or are required to clear pending dues, leaving less than ₹2,500 crores available for the next two months.
Budget Allocation and Current Status
The budget allocation for the MGNREGA scheme in 2019 stood at ₹60,000 crores. This figure is notably less than the amount spent in the previous year. Currently, many state governments haven’t disbursed the wages to workers as the Centre has not released the monetary support. This situation contradicts the spirit and principles of rights-based implementation of the MGNREGA scheme. To make matters worse, the Central Employment Guarantee Council, which oversees the scheme and advises the government on its implementation, hasn’t convened a meeting in two years; a clear violation of the six-month mandatory meeting guideline.
State-wise Scenario
On a state level, Rajasthan suffers from the highest negative net balance of ₹620 crores, followed by Uttar Pradesh with a deficit of ₹323 crores. Some states, however, still have funds remaining, but it’s speculated that this is due to suppressed demand and turning away of workers. In a bid to avoid liability for delayed wage interest payments, state governments could be reducing demand. The actual scenario may be far grimmer as states do not always register pending payments into the information system.
| State | Negative Net Balance |
|---|---|
| Rajasthan | ₹620 crores |
| Uttar Pradesh | ₹323 crores |
Urgency for Funds
The months of January, February and March are typically characterized by low agricultural activity. It is during this period that rural workers need employment the most. The rural economy’s distress and the collapse of informal employment in 2019 resulted in a high demand for work. Many economists believe that revitalizing the rural economy involves allocating money to rural consumers via the MGNREGA scheme. However, with funds dwindling, the scheme seems to be heading towards 2020-21 with pending liabilities.
About Mahatma Gandhi National Rural Employment Guarantee Act, 2005
Enacted in 2005, the MGNREGA aims at improving the livelihood security of people in rural areas by guaranteeing hundred days of wage employment in a financial year to a rural household. This applies to adult members (at least 18 years of age) who opt to do unskilled work. The central government bears the full cost of unskilled labour, and 75% of the material cost (the remaining is borne by the states). It is a demand-driven, social security and labour law that enforces the ‘right to work’. The implementation of the scheme is jointly monitored by Ministry of Rural Development (MRD), Government of India and state governments.