‘Jobs often unavailable when sought’ — Economic Survey says NREGS demand ‘not real indicator’ of distress

States with lower poor population such as Tamil Nadu and Kerala used relatively higher proportion of MGNREGS funds due to better administration, says survey report.

Workers employed under the MGNREGS in Madhya Pradesh | Photo: ANI

New Delhi: Demand for funds under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is not a “real indicator” of rural distress, as states with a high rural population have accounted for a lower share of scheme funds, the Economic Survey 2023-24, tabled in Parliament Monday, has noted.

Contrary to the popular belief that job demand under the scheme indicates rural distress, the survey report says employment demand under the MGNREGS is predominantly linked with a state’s institutional capacity to tap into scheme benefits via better planning, wages for various works under the scheme, and other factors.

The Mahatma Gandhi National Rural Employment Guarantee Act of 2005, which was implemented in February 2006, guarantees 100 days of employment in a financial year to adult members of any rural household for unskilled work.

“Data from financial year 2023 shows that states with the highest rural unemployment rates did not necessarily use the most MGNREGS funds. Contrary to the popular narrative, the data does not support the idea that states with high rural unemployment rates in FY22 sought more MGNREGS funds in FY23,” the report says.

For instance, Tamil Nadu and Kerala (with less than 1 percent and 0.1 percent of the country’s poor population, respectively) accounted for nearly 15 percent and 4 percent of the MGNREGS funds released in FY24. The total person days generated (number of days for which work was demanded) under the scheme in these two states was 51 crore.

“In contrast, Bihar and Uttar Pradesh, with about 45 per cent (20 percent and 25 percent, respectively) of the country’s poor population, accounted for only 17 percent (6 percent and 11 percent, respectively) of MGNREGS funds and generated 53 crore person-days of employment,” the report adds.

It said that the demand indicated on the Centre’s MGNREGS portal is not an indication of the real demand, as “employment is often unavailable when sought”. This has been one of the key concerns raised by MGNREGS workers and civil society members for years now.

“Evaluation reports indicate that employment was often unavailable when sought. This suggests that block-level functionaries may not register demand in real time. Consequently, formal data showing MGNREGS work demand may not reflect the true demand and current rural economic distress,” according to the survey.

“This also indicates that work demanded is only reported on the portal when employment is actually provided (presumably to save on the state government’s liability towards unemployment allowance). Hence, work demanded on the portal is de-facto equivalent to work provided and not the ‘real’ demand,” it adds.

While MGNREGS numbers might not reflect rural distress, the Economic Survey indicates an increase in demand for work under the scheme in 2023-2024 compared to the pre-pandemic period.

According to the survey report, 265.4 crore person-days were generated under the scheme in 2019-20 whereas the number was 309.2 crore person-days in 2023-24 (till 31 March, 2024). The average person-days per household rose from 48.4 in 2019-20 to 52.1 in 2023-24.     

However, Chakradhar Buddha, senior researcher with LibTech India, a platform for social workers, engineers and social scientists working towards improvement of public service delivery, told ThePrint that “it is incorrect to say that demand for work under the MGNREGS is not a real indicator of rural distress based on state-level comparison data”.

“Comparing district-wise MPI (multidimensional poverty index) with MGNREGS fund utilisation, instead of state-level, will provide a clearer picture of rural distress. More backward districts register higher employment, highlighting true distress. Moreover, the report states that demand shown on the MGNREGS portal is not the actual demand as often employment sought is not provided,” he added.

“In several rural welfare schemes, southern states have performed better than states in north India due to good institutional infrastructure in place. Institutional capacities and other factors cited in the report play a role in demand for work or fund utilisation under the scheme. But it is wrong to conclude that MGNREGS demand is not related to rural distress; else, how do we explain the sharp increase in demand for work during the Covid pandemic?” he asked.

‘States with high per-capita income better utilise MGNREGS funds’

One of the key factors behind the difference in work demand pattern under the MGNREGS, the report says, is the institutional capacity of states.

A state’s institutional capacity plays a crucial role in tapping the benefits of the scheme due to advanced planning, and meeting requirements such as utilising at least 75 percent of the previous year’s funds, providing utilisation certificates ang expenditure statements, among others, to apply for fund tranches. States with better institutional capacity and trained functionaries can complete this process on time, it adds.

Referring to previous studies, the report points out that states with lower per-capita income and higher poverty levels “often have weaker institutions”, thereby tapping fewer funds per work executed and “generating less employment per capita for the rural poor”.

For instance, Uttar Pradesh, Karnataka and Madhya Pradesh executed many works but used fewer funds per work in FY24. Conversely, states like Puducherry, Haryana, Rajasthan and Tamil Nadu tapped more funds per instance of work.

“States with higher institutional capacities plan and coordinate better, executing costlier works in rural infrastructure or natural resources management. In contrast, lower-income states like Assam, Jharkhand, Bihar, UP, Chhattisgarh, MP, and Rajasthan have a higher proportion of ‘individual works’ (50 per cent or more), which are less costly and require less planning. Thus, a state’s institutional capacity is crucial for effectively tapping into MGNREGS funds,” the report explains.

Another major factor impacting demand for MGNREGS funds is the difference in wages. The report says minimum wage fixation by states is ad hoc and does not correlate with per capita income.

States such as Haryana, Kerala, Tamil Nadu, Karnataka and others have relatively high notified wage rates under the MGNREGS as compared to their per capita incomes, says the survey report. This significantly impacts state-wise MGNREGS fund usage, as the wage component is fully borne by the central government.

‘MGNREGS has evolved into an asset-creation scheme’

In the past decade, there has been a substantial increase in the share of individual beneficiaries as more works under MGNREGS have been sanctioned on individual land for asset creation, such as dugwells, sheds for livestock, horticulture, etc.

In FY14, 9.6 percent of the total completed works under the scheme were sanctioned under “works on individual land” category, which increased to 73.3 percent total works sanctioned in the same category in FY24.

“While MGNREGS began as a wage employment scheme, it has evolved into an asset creation programme for sustainable livelihood diversification,” the report says.

(Edited by Nida Fatima Siddiqui)