In 2020-21, the central govt plans to spend much more money than it ever has on the MGNREGS and has increased the allocation by ₹40,000 crore to over ₹1 trillion
In 2020-21, the central government plans to spend much more money than it ever has on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and has increased the allocation by ₹40,000 crore to over ₹1 trillion. Mint analyses if this will be enough.
Why is so much money needed for MGNREGS?
The government plans to spend ₹1,01,500 crore (see Chart 1) under MGNREGS this fiscal. During an economic upheaval, governments go back to what British economist John Maynard Keynes had suggested: In tough economic times, when the private sector and individuals are not spending money, the government should become the spender of last resort to put money in people’s hands. The ratio of the total amount to be spent under MGNREGS and GDP is 0.45% (see Chart 2). Even after adjusting for growth in the size of the Indian economy over the years, the MGNREGS spending will be the highest since 2014-15.
How will this spending help individuals?
The National Council of Applied Economic Research (NCAER) expects the Indian economy to contract 12.5% in 2020-21, with industry and services likely to shrink 27.1% and 8.1%, respectively. As such, many people may lose their jobs and quite a few already have, particularly in the informal sector. This, to a large extent, explains the rush among migrant workers to go back to their native places. The government needs to create work for them, along with others. Finance minister Nirmala Sitharaman recently said states had been advised to provide work to migrant workers, according to the provisions of the scheme.
What does the rural job scheme seek to achieve?
NCAER expects the agriculture sector to grow by 2.3% this year. But even this growth rate is not going to be enough for the migrant workers returning home as the agriculture sector already employs more people than is economically feasible. As such, the government’s rural job scheme seeks to provide work to the migrants.
Will the increased spending be enough?
As of 18 May, 23.3 million households had sought work under the scheme; for the whole of May 2019, the number was 25.1 million. As the government recently said in an answer to a question raised in the Lok Sabha, MGNREGS is a “fall-back option for livelihood for the rural households when no better employment opportunity is available". Households have started utilizing this option and as more migrant workers return home, the demand for work under the scheme will only go up.
Anything else that the government can do?
Over the years, the government has been able to provide around 50 days of work per household. In 2018-19 and 2019-20, this was 50.9 days and 48.4 days, respectively. In states such as Bihar and Uttar Pradesh—the native places of a bulk of migrant workers—the figure was much less at 41.3 days and 44.8 days, respectively. There is a need to create more work in these states and if that means spending more money, the Centre should be ready on that front.
