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On the eve of the Union Budget presentation, the central government in its Economic Survey 2023-24, has concluded that job demand under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is not a real indicator of rural distress.
The Survey, which was released on July 22, stated that utilisation of funds and generation of employment are not proportional to poverty levels, but incapacity of the state’s institutions and varying minimum wages among others.
Citing data from Management Information System (MIS), the government noted that for financial year 2023-24, Tamil Nadu has less than one per cent of India’s poor population and spends almost 15 per cent of the overall MGNREGS funds in a state-wise comparison.
Furthermore, Kerala with only 0.1 per cent of the country’s poor population, accounted for nearly four per cent of the country’s MGNREGS funds. The two states alone were responsible for generating 510 million person-days of employment under the poverty alleviation scheme.
On the contrary, 45 per cent of the poor population from Bihar and Uttar Pradesh comprising 20 per cent and 25 per cent share of India’s poor people respectively, collectively amounted to 17 per cent, with 6 per cent and 11 per cent utilisation of MGNREGS funds respectively.
Both the states generated 530 million person-days of employment.
“The correlation coefficient between state-wise multidimensional poverty index and person-days generated is calculated to be only 0.3, indicating that MGNREGS fund usage and employment generation are not proportional to poverty levels,” the report noted.
It further said calculations showed that MGNREGS fund usage and rural employment rates are not correlated to each other. The Survey noted that data from financial year 2022-23 showed that states recording highest unemployment rates did not necessarily utilise MGNREGS funds.
Contrary to the popular narrative, data from financial year 2021-22 failed to reflect that states with higher unemployment rates sought more MGNREGS funds the following year in 2023.
The document further pointed out that provisions under MGNREGS permitted states to decide their own minimum wage, unless a national minimum wage was established. This setting up of wages should be the ideal measure for local employment opportunities, per-capita incomes and alternate income sources, the report observed.
However, scheme data shows that minimum wage fixation is ad hoc and has no relation with per capita income or poverty headcount ratio.
“States such as Haryana, Kerala, Tamil Nadu, Karnataka, and others have relatively high notified wage rates in MGNREGA, relative to their per-capita incomes. This significantly impacts state-wise MGNREGS fund usage, as the wage component is fully borne by the Central Government,” the report noted.
It mentioned that an analysis of the factors could offer answers about differences in MGNREGS work demands across states.
The report argued that as demand is not directly correlated to increased rural distress at a micro level, it is the remarkable evolution of MGNREGS work that instead of being perceived as a last resort for village resident families, it is turning out to be a ‘smart choice’ for household asset creation and stable income generation.
The report said other factors such as difference in MGNREGS fund utilisation could determine annual demands in agreed labour budgets.
Estimates for financial year 2024-25 showed that states with a high rural poor population such as Uttar Pradesh, Madhya Pradesh and Bihar are likely to have higher annual person-days.
“The variance is likely due to actual fund usage based on the work completed,” it noted.
The report also pointed out demand side issues such as a state’s institutional capacity to seek benefits under MGNREGS funds. To use them, states must finalise labour budgets for the coming financial year in advance.
The Survey cited that states having lower per capita incomes and high poverty levels often saw weaker institutions, which brought challenges and access to fewer funds per work executed, thereby generating less employment per capita for the rural poor.
It said that according to financial year 2023-24 data, states like UP with nearly 1 million work days, Karnataka with about 0.9 million work days and MP with almost 0.777 million work days, implemented many projects but used less MGNREGS funds per work that is Rs 0.93 lakh, Rs 0.55 lakh and Rs 0.72 lakh respectively.
On the other hand, states and Union Territories such as 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.
A similar trend continues for person-days employment generated per capita for the rural poor in Tamil Nadu, Kerala, Rajasthan and Puducherry, surpassing UP, MP and Bihar.
“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,” it noted.
About the unavailability of employment when sought, the document said that data suggests issues at the block-level, where the functionaries may not register the demand in real-time.
Further, the data reflecting MGNREGS work demand may not show actual demand and current rural economic distress. These factors also reveal that work demanded only reflects on the portal once the employment is actually received by the beneficiary.
The government presumes such instances happen to save 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 said.
The report also took cognisance of the leakages. It cited that over the past four years, social audit units recorded misappropriation of about Rs. 935 crore under the MGNREGS.
These misappropriations accounted for workers paying contractors in exchange of job cards, illegal use of machines against the requirement of using labour, unrealistic labour budgets and delay in release of funds.
Lack of job cards and unverified bills were also reasons noted among violations of transparency, accountability and record-keeping process that impacted MGNREGS implementation.