Wednesday, February 1, 2023
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Urban MGNREGA is a short-sighted idea, Modi govt has shown good sense to drop it

Scope for manual earth work like digging of canals is limited in cities. An urban MGNREGA might not provide employment and create assets as it’s expected to.

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The proposal that the government should bring in a right to employment in urban areas for Covid relief may be a quick band-aid to help workers who have lost their jobs in the lockdown.

But it is a short-sighted idea considering the state of urban governance and funds available with cities for building infrastructure, law and order, water, sanitation, solid waste management, electricity, roads, public transport, health and education.

Over time, an urban version of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) could encourage job-seekers in rural areas to seek jobs in cities without the necessary skills needed by cities, and without any idea of the demand for labour because of the added comfort of an urban employment guarantee.

Also read: Why migrant workers are starting to return to cities & how this can revive economy faster

The argument for an urban MGNREGA

Under MGNREGA, the government guarantees 100 days of wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work. If a job-seeker does not get employed within 15 days of applying for a job, the applicant is entitled for unemployment allowance.

The Covid-induced lockdown led to a halt in economic activities in urban areas and resulted in a process of reverse migration of workers to villages. To address the mounting rural distress emerging from the large-scale migration of workers, the government increased the MGNREGA allocation by Rs 40,000 crore under the Atmanirbhar Bharat package.

The scope of work has also been expanded to provide benefit to more job-seekers in rural areas. As an outcome, the scheme has aided in improving rural incomes. It helped people stay in rural areas, which have been safer than crowded cities in the pandemic.

A proposal has been floated for introducing an employment guarantee programme for urban workers. It is argued that workers employed in informal sectors in urban areas have seen a collapse in their incomes. With no social security net to fall back on, there should be an urban replica of MGNREGA as an urban employment guarantee programme.

Rural versus urban

While the proposal is noble in its intent, it is short-sighted.

In rural areas, MGNREGA typically involves manual earth work like digging of canals but the scope for manual unskilled work is limited in urban areas.

MGNREGA was envisaged to help farmers and agricultural labourers seek jobs between two cropping seasons, or in ups and downs in employment, to prevent them from slipping into poverty. The scheme is conceived as wage-intensive, and less money is allocated towards materials and administration. The argument that the scheme would provide employment as well as result in asset creation in urban areas may not hold true. The emphasis on labour-intensive works prohibiting the use of contractors and machinery makes MGNREGA amenable to addressing the problem of rural unemployment and under-employment.

The capital content of urban infrastructure tends to be high. For employing the same number of workers, the total expenditure would need to be much higher in, say, construction activities. The norms as well as the cost per worker would be much higher.

Also read: Is Modi govt trying to decongest Indian cities? Its economic package gives that impression

The problem of urban local bodies

An urban MGNREGA could potentially propel migration of workers from rural to urban areas. This could create challenges for the already crumbling infrastructure and services in urban areas.

Less than 10 per cent of the 4000-plus statutory cities have a sewerage system. More than 45 per cent of urban households are known to depend on on-site sanitation systems. Public utilities such as roads lack design standards. The administration of small towns and cities is under the purview of urban local bodies (ULBs). However most ULBs are understaffed and lack skilled staff to meet infrastructure and service delivery needs of citizens. They are also financially constrained — their own revenue is an abysmally low 1 per cent of the GDP.

The Fifteenth Finance Commission is understood to have made recommendations towards improving allocation to local governments and ULBs. While a number of schemes such as the Smart City Mission and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) have been initiated to empower the ULBs, their experience in terms of governance and service delivery has been sub-optimal.

In the rural areas, the gram panchayats are responsible for issuing job cards, but this will be a challenge for ULBs with their governance problems.

The roll-out of an urban MGNREGA that seeks to guarantee 100 days of employment to each adult resident in cities would be fiscally challenging. Research by scholars at the Azim Premji University suggests that it would cost Rs 4,50,000 crore.

Reports suggest that the idea of introducing an urban MGNREGA has been dropped for now, due to shortage of funds. In addition to its already enhanced borrowing programme for this year, the government will need to borrow additionally to meet the shortfall of GST compensation.

Hopefully, good sense will continue to prevail. With cities bursting at the seams, and law and order and women’s safety already a serious issue in cities like Delhi, hopefully, long-term thinking too will prevail.

Until the quality of life of residents is improved through safe residential structures, greater ecological resilience, and access to basic services like water and sanitation, the introduction of an urban variant of MGNREGA could create more challenges than solutions. This will require far-reaching reforms in the functioning of urban local bodies.

Ila Patnaik is an economist and a professor at National Institute of Public Finance and Policy.

Radhika Pandey is a consultant at NIPFP.

Views are personal.

Also read: Aadhaar, MGNREGA, DBT, rural housing — how Modi has hijacked Congress legacy


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  1. The article does not state who came up with this great idea of Urban MGNREGA. If it is the Prime Minister Narendra Modi’s idea, I would say that he is the worst populist politician after UPA. Indira Gandhi spoke lot of populism and spoke of Garibi Hatao. She did not spend anything to follow as she had no clue about eradication of poverty. UPA found a way of drainign the treasury by distributing largess through MGNREGA. Now, Modi has to do better than UPA. I am sorry to note that the originality of thinking which prevailed in Modi 1.0 has been lost. Now, BJP is no different from Congress. Little wonder that India has no money for defence upgradation while the enemy is standing at the gate.

  2. Ila ma’am has argued well. However, it would be great to know what she’d suggest to address the collapse of incomes of urban poor. In her earlier videos ma’am has suggested that getting people out to work and spend safely is the best stimulus there is. Seems like vaccine is atleast 6 months away, what do we do?

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