‘MGNREGA Allocation Slashed by Rs 9,000 Crore Amid Alarming Rural Distress’

New Delhi: At a time when rural distress is rising, food inflation is on a high and the unemployment is the highest in the past four decades, the Narendra Modi-led government has hit where its hurts the poor most – it has slashed allocation for the rural job guarantee scheme – MGNREGA. The scheme was a kind of lifeline for the poorest among the rural population, who are bearing the worst brunt of the agrarian crisis.

Terming this move by the Union Budget as a display of “total lack of responsibility and sensitivity”, the Peoples’ Action for Employment Guarantee, which includes activists Annie Raja, Jayati Ghosh, Nikhil Dey, Rajendran Narayanan and Rakshita Swamy, said the move show the BJP’s total lack of concern for the marginalised and an insult to the law that the government has a duty to implement.

Read the full statement below:

The Peoples’ Action for Employment Guarantee, is distressed to note the total lack of responsibility and sensitivity accorded by the Union Budget 2020-21 to the rural economy in General, and MGNREGA in particular. It is telling and obviously callous that the Budget estimate for this year at 61500 crores is Rs 9500 crores less than the revised estimate of 2018-19.

Rural distress has risen to alarming levels. As per the Periodic Labour Force Survey (PLFS) of 2017-18, rural unemployment has increased by 8 percent from 2011-12, and overall unemployment is the worst in 45 years.  In conjunction with double-digit food inflation levels, this is a serious concern. The situation is much worse for the landless depending on casual manual labour who constitute more than half the rural population. On ranking the rural population from the poorest to the richest, and dividing them into 10 groups, the Monthly Per Capita Consumption Expenditure (MPCE) has fallen for every group. What this means is that the entire cross section of rural India has become poorer.

In this context, all eyes were on the Union Budget 2020-21 to see how the Central Government would leverage its only legislative mechanism to provide employment and alleviate rural distress i.e. the Mahatma Gandhi National Rural Employment Guarantee Act. And the result has been worse than expected, and deeply distressing. The BJP Government has reduced the budgetary allocation of MGNREGA by Rs 9,500 crores from its revised estimate of 2019-20. The revised estimate of MGNREGA in 2019-20 was Rs 71,000 crore, and the budget estimate of MGNREGA for 2020-21 as announced in the Union Budget today stood at Rs 61,500 crore. The reduction in the budgetary allocation is taking place when the minimum allocation needed to protect the MGNREGA as status quo is nearly Rs 85,927* crore. This in itself is a suppressed figure because:

i) it does not include the amount of pending liability that might be due at the end of this year for wages, material and administrative cost

ii) The figure is based on the approved labour budget of 2019-20, which is a suppression of the real labour demand on the ground

iii) It is based on severely suppressed MGNREGA wages which are below minimum wages in most of the states.
*Calculation used to arrive at the minimum allocation of Rs 85,927 crore is as follows:

i) Considering Rs 268 as the cost of generation of one person day, by accounting for an increase of 8% 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 persondays as the approved labour budget as of 2019-20

iii) Total financial allocation required to meet wage payments for approved LB would include i + ii, i.e. Rs 72,360 crore

iv) On average, 25% of the total expenditure has been for material costs (actually this could go up to 40%).. This translates to 0.25*72,360 = Rs 18,090 crores for material component. As per the Act, 75% 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 13,567crore.

v) The total allocation required by the Central Government for wages + material = Rs72,360 cr + Rs 13,567cr = Rs85,927 crores)

Pending liabilities have been amounting to nearly one-sixth of each year’s allocation. The “approved labour budget” has been used by the central government to suppress demand. Wage rates of MGNREGA are lower than minimum wages in most states. If these basic factors are taken into account, the minimum allocation required to implement MGNREGA as per the law, enabling a demand based guarantee of 100 days work on demand , should be no less than Rs 1 lakh crore.

February 2nd is MGNREGA day. A reduction in the budgetary allocation for MGNREGA in the year 2020-21 is an insult to the law the government has a duty to implement. It is also a clear indication of the BJP Government’s lack of priority towards the marginalised. No less can be expected from a Government led by a Prime Minister who in the Parliament vowed to keep MGNREGA alive only to prove it as a testament of failure.

This is a travesty for the rural poor, for whom the MGNREGA is a potential lifeline. The Peoples’ Action for Employment Guarantee (PAEG) resolves to continue fighting for a fair allocation to MGNREGA and advocate for its implementation across the country as mandated in the law.  

Annie Raja, Jayati Ghosh, Nikhil Dey, Rajendran Narayanan and Rakshita Swamy

(on behalf of the Peoples Action for Employment Guarantee)