Budget 2020: MNREGS suffers as government focuses on containing fiscal deficit

At a time when rural unemployment has risen by 8 percent — from 2011-2012 to 2017-2018 — and the demand for work is up in those areas, the government has slashed allocation for MNREGS by 13 percent.

In the Union Budget 2020, Finance Minister Nirmala Sitharaman announced Rs 61,500 for the job guarantee scheme for FY21, down from the revised estimates of Rs 71,002 for FY20.

The Mahatma Gandhi National Rural Employment Guarantee Scheme or  MNREGS aims to guarantee the 'right to work'. Under this, the government provides at least 100 days of wage employment in a fiscal year to each household for unskilled annual work.

The number of person-days generated in the January-December 2019 is higher than in the same period last year. For instance, in states like Rajasthan, the work demand was over 66 percent between 2018 and 2019. The number of person-days generated under MNREGA stood at 38.77 crore for the calendar year 2019 versus 23.25 crore for CY2018.

There has been a moderation in work demanded under MNREGS post-July 2019. But, the demand is reflective in the record increase in expenditure in the current fiscal. From the budgetary estimates of Rs 60,000 crore for FY2019-20, the revised estimate is pegged at Rs 71,002 crore and analysts point out to liabilities and payment dues still pending to be cleared.

There has been a continuous growth in the last 5 years since 2014-15 in the number of people given jobs under MNREGA. Data provided by Rural Development Minister Narendra Singh Tomar shows a 25 percent jump — from 6.22 crore people working in 2014-15 to 7.77 crore in 2018-19. But the allocations have not kept pace with it, say analysts.

Some experts say considering MNREGS is a demand-driven scheme, the allocations are made accordingly. “MNREGA’s demand increases during drought years, last year was a bumper year with record production, hence could be a possible reason for cuts,” said Ashok Gulati, Chair Professor for Agriculture at ICRIER.

Lower allocation and continued delays in wage payments, largely triggered by delayed fund release from the Centre, has been a major issue in the implementation of the scheme.

Rajendran Narayanan of the Azim Premji Foundation said, “The current allocation does not include the amount of pending liability that might be due at the end of this year for wages, material and administrative cost. Besides this is based on severely suppressed MGNREGA wages which are below minimum wages in most of the states.”

“Accounting for work demand, pending payments and inflation, any allocation for MGNREGA less than Rs 1 lakh crore would be insufficient. Fifteen states have already used most of their allocated MNREGA funds and have dues to be cleared in FY19-20,” said Nikhil Dey, on behalf of the Peoples Action for Employment Guarantee.

A total of Rs 10,880 crore is still pending as labour and material cost under MNREGS. 77 percent of January wage payments and 38 percent of wage payments in December are still pending.

With Rs 65,500 crore being already spent in the 10 months of FY20, additional Rs 13,000 crore will be required for the remaining months. “February and March are more MNREGA intensive months and hence the revised estimate targets do not cover up for the upcoming works,” said Mukesh, an RTI activist in Rajasthan.

A keen eye on containing fiscal deficit could be a major reason for the government to be mindful of increasing expenditures, particularly on larger schemes.

Siraj Hussain, former Agriculture Secretary, said, “This is to balance the budget, anyways the income for next year is overstated with estimates of 10 percent nominal growth, three times higher divestment targets versus last year. All this may not materialise, especially on divestment and hence the government wants to balance it.”

The biggest change has been in food subsidy, where the FM has changed the structure. From the budgeted amount of Rs 1,84,220 crore in FY'20, the government now has a revised estimate of Rs 1,08,688 crore — a massive cut of Rs 76,000 crore.

The government has shifted this food subsidy cash outgo to almost fully financing it from the NSSF or the National Small Savings Fund.

For the next fiscal, the government has only allocated Rs 1,15,569 crore.

“The government is now looking at FCI to borrow rather than provide for it in the budget to keep their fiscal deficit low. Just because of food and fertiliser subsidies and some PSU’s they have to add 1 percent to their target otherwise,” said Gulati.