Underestimated Utility

Context: Lowered outlay for rural guarantee scheme MGNREGA has led to used up allocation and wage delays.

Significance of Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

• Life-saver for the poor, especially for migrant laborers during lockdowns amidst pandemic.
• High demand: To meet high rise in demand in FY21, allocations for MGNREGA were increased by Rs 50,000, with the Revised Estimates for spending for the scheme going up to Rs 1,11,500 crore.
• Effective substitute in the absence of crop and weather insurance: Aiding poor farm households and helping to provide wages during agrarian crises.

Challenges in execution of the MGNREGA Scheme

• Cutting of funds: This year only Rs. 73,000 crore was allocated for the scheme, which was higher than the previous year’s absolute number in Budget allocations.
• This amounted only to 2.1% of Budget expenditure, lowest outlay in those terms in last six years.
• Civil society activists claim that some workers have been turned away by officials despite the demand for work because of the paucity of funds.
• Over-utilisation of funds and high demand in better-off states: Kerala, Tamil Nadu, Andhra Pradesh and Himachal Pradesh had utilised more than 130% of their respective allocations for the scheme by October end.
• Union government has underestimated the demand for work under the scheme: The pandemic support for the scheme shall have extended for a while before making steep contraction.
• Delays in wage payments: Could also result in a decline in rural consumption, which plays a vital role in stimulating the economy.

Conclusion: Besides the scheme’s utility in distress, it also has the potential, if works are upgraded suitably, to continue to improve rural development and infrastructure. The Union Government must consider this during allocations and not be conservative in its outlay or remain unmindful of the overall potential of the scheme.