Budget 2024–25: Unemployment

The budget allocated for MGNREGA for FY 2024-2025 in this year’s Budget is at Rs 86,000 crore, which remains unchanged since last year from 2023-2024.

• Expenditure: 44 percent of the Rs 86,000 crore allocated to MGNREGA in the 2024-25 budget has already been spent and the total expenditure on MGNREGA was nearly Rs 1.2 lakh crore last year.
• Reason: The Union Government in their analysis of MGNREGA in Economic Survey 2024 has concluded that demand for MGNREGA work and fund utilisation by states cannot be a  determinant to regard MGNREGA as an indicator of Rural distress.

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Key Highlights from the Economic Survey 2024 on MGNREGA

• Not an Indicator of Rural Distress: The Survey stated that utilisation of funds and generation of employment are not proportional to poverty levels in a state and job demand under MGNREGS is not a real indicator of rural distress.
  • The Correlation Coefficient: It is calculated to be only 0.3, between state-wise multidimensional poverty index and person-days generated, and indicates that MGNREGS fund usage and employment generation are not proportional to poverty levels.
• Supporting Argument: It cites data from Management Information System (MIS) and notes in a state-wise comparison that,
  • Tamil Nadu (less than one per cent of India’s poor population) and Kerala (0.1 per cent of poor population) had spent almost 15 per cent and four per cent of the total MGNREGS funds in FY 2023-2024.
    • The two states alone were responsible for generating 510 million person-days of employment under the poverty alleviation scheme. 
  • Whereas, Bihar and Uttar Pradesh comprising 20 per cent and 25 per cent share of India’s poor people respectively  amounted to 6 per cent and 11 per cent utilisation of MGNREGS funds respectively generating 530 million person-days of employment. 
• Reason Affecting the State-wise MGNREGS fund usage: 
  • Ad hoc Minimum Wage Fixation: Scheme Data shows no corelation between Minimum Wage fixated by states and the per capita income or poverty headcount ratio. 
    • States such as Haryana, Kerala, Tamil Nadu, Karnataka, and others have notified high MGNREGA wage rates relative to their per-capita incomes which will be borne by the centre.
    • MGNREGA provisions permit states to decide their own minimum wage which aim to serve as an ideal measure for local employment opportunities, per-capita incomes and alternative income sources.
  • Incapacity of State’s Institution: States with low per capita incomes and high poverty levels often saw weaker institutions resulting in access to fewer funds per work executed, thereby generating less employment per capita for the rural poor.
    • States with higher institutional capacities plan and coordinate better, executing costlier works in rural infrastructure or natural resources management. 
      • Example: Puducherry, Haryana, Rajasthan and Tamil Nadu tapped more funds with Rs 8.96 lakh, Rs 4.89 lakh, Rs 2.76 lakh and Rs 2 lakh per work. 
    • Whereas, lower-income states have a higher proportion of “individual works” (50 per cent or more), which are less costly and require less planning
      • Example: UP (1 million work days), Karnataka (0.9 million work days) and MP (0.777 million work days) used less MGNREGS funds per work that is Rs 0.93 lakh, Rs 0.55 lakh and Rs 0.72 lakh respectively. 
  • Timely Registering of the Demand: 
    • The Economic Survey suggests that there lies issues at the block-level, where the functionaries may not register the demand in real-time as the work demanded only reflects on the portal once the employment is actually received by the beneficiary. 
      • Thus the work demanded on the portal is de facto equivalent to work provided and not the “real” demand and does not show the current rural economic distress. 

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