MGNREGA allocation is way off the mark to uplift the rural economy & address economic downturn, say Right to Work activists

MGNREGA allocation is way off the mark to uplift the rural economy & address economic downturn, say Right to Work activists

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published Published on Feb 3, 2020   modified Modified on Feb 4, 2020

The Union Budget 2020-21, which was presented by the Finance Minister Smt. Nirmala Sitharaman on 1st February, 2020 has failed to impress civil society activists and farmers' rights groups (click here  and here). Through their press releases and notes, members of CSOs were demanding as well as suggesting the Union Government for hiking the budgetary allocation for schemes like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and Pradhan Mantri Kisan Samman Nidhi Yojana (PM-KISAN) in particular, and rural and agrarian sectors in general.

Among other things, it is believed that increasing the budgetary spending on MGNREGA and PM-KISAN will improve purchasing power of the rural masses so that the country could tackle economic slowdown and low demand. That way, the government could have addressed rural distress despite facing low tax collection.   

Unfortunately, it now seems that most demands and recommendations of social activists and economists have fallen on deaf ears. Budgetary allocation for MGNREGA has been slashed from Rs. 71,002 crores in financial year 2019-20 (Revised Estimates-R.E.) to Rs. 61,500 crores in FY 2020-21 (Budget Estimates-B.E.), which is a fall of about Rs. 9,502 crore (-13.4 percent).

In comparison to MGNREGA allocation of Rs. 60,000 crores in 2019-20 (B.E.), the rise in allocation in 2020-21 (B.E.) is only by Rs. 1,500 crores viz. 2.5 percent. In 'Budget at a Glance 2020-21' document, nominal gross domestic product (GDP) growth in 2020-21 over 2019-20 is expected to be 10.0 percent. In other words, MGNREGA allocation (B.E.) as a proportion of GDP in 2020-21 is expected to be lower vis-à-vis what existed in 2019-20.

Please note that the Economic Survey 2019-20 anticipates an economic growth (viz. real GDP growth rate) in the range of 6.0-6.5 percent during FY 2020-21. It means that the rate of inflation (viz. growth in GDP deflator) in the economy is expected to be around 3.5-4.0 percent in FY 2020-21, assuming a nominal GDP growth of 10.0 percent as provided by the 'Budget at a Glance 2020-21' document. The increase in MGNREGA allocation (B.E.) in nominal terms between 2019-20 and 2020-21 (viz. 2.5 percent) appears to be lesser than the rate of inflation (of GDP deflator) between these two years. Therefore, in real terms, MGNREGA allocation in 2020-21 is lesser than that in 2019-20, even if we use the official data.

In a press release dated 1st February, 2020, Peoples' Action for Employment Guarantee (PAEG) – a civil society group of experts and activists working on MGNREGS – has estimated that the Union Budget 2020-21 should have ideally set aside a minimum sum of Rs. 85,927 crores for MGNREGA. Their calculation is based on the following assumptions:

i. Considering Rs. 268/- as the cost of generation of one-person day, by accounting for an increase of 8 percent from previous year’s cost of generation of one-person day (Rs. 248/-) due to wage indexation to price rise and inflation.

ii. Considering 270 crore person-days as the approved labour budget (LB) as of 2019-20.

iii. Total financial allocation required to meet wage payments for approved LB would include assumptions made in i + ii, i.e. Rs. 72,360 crores.

iv. On average, one-fourth of the total expenditure has been for material costs (actually this could go upto 40 percent). This translates to 0.25*72,360 = Rs. 18,090 crores for material component. As per the MGNREG Act, three-fourth of the material cost has to be borne by the Central Government. Thus, the material cost to the Central Government is 0.75*18,090 = Rs. 13,567 crores.

v. The total allocation required by the Central Government for wages + material = Rs. 72,360 crores + Rs. 13,567 crores = Rs. 85,927 crores.
The press release by PAEG has also clarified that had the budget taken into account pending liabilities at the end of each year (around one-sixth of each year’s allocation), payment of minimum wages in MGNREGA scheme (which is not happening at present in most states) and actual labour budget instead of the "approved" labour budget, where the figures are suppressed, then the budgetary allocation should not have been less than Rs. 1 lakh crore.
The budgetary sum earmarked for PM-KISAN has not been fully spent in FY 2019-20. It is because the R.E. for PM-KISAN (viz. Rs. 54,370 crores) is lesser than that of B.E. (viz. Rs. 75,000 crores) in FY 2019-20. Therefore, disbursement of PM-KISAN funds is not taking place in rural areas, as has been shown by some news reports
Budget speech by the Finance Minister dated 1st February 2020, please click here to access

Farmers' group not impressed with Union Budget 2020-21, Press released by All India Kisan Sangharsh Coordination Committee (AIKSCC) dated 1st February, 2020, please click here to access

Budgetary allocations to agricultural and rural sector is meagre, alleges ASHA, Press release by Alliance for Sustainable & Holistic Agriculture (ASHA) dated 1st February, 2020, please click here to access 

MGNREGA allocation slashed by Rs. 9,500 crore in the Union Budget 2020-21, allege Right to Work activists, Press release by Peoples' Action for Employment Guarantee dated 1st February, 2020, please click here to access 

Civil society demands for increase in budgetary allocation under MGNREGA to clear pending wages, Press release by NREGA Sangharsh Morcha dated 31st January, 2020, please click here to access 

Civil society presses for an increase in budgetary allocation for MGNREGA in FY 2020-21, Press release by NREGA Sangharsh Morcha dated 27th January, 2020, please click here to access 

Economic Survey 2019-2020, Volume-II, Ministry of Finance, please click here to access 
Guidelines/ framework for "Planning for Works and Preparation of Labour Budget" under the MGNREGA for the FY 2020-21, please click here to access 
Almost 75% farmers did not get all 3 PM Kisan instalments, a year after implementation -Kabir Agarwal,, 28 January, 2020, please click here to access  
Image Courtesy: Mazdoor Kisan Shakti Sangathan (MKSS)

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