Stifling demand: On the MGNREGS

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is approaching its 20th anniversary, and its role in rural development and economic sustenance is being reassessed, especially after its vital function during the COVID-19 pandemic. However, its funding has decreased significantly in recent years, raising concerns about its future effectiveness.

MGNREGS' Utility and Popularity

• Survival Across Governments: MGNREGS has endured across different political regimes, reflecting its importance and widespread popularity among rural communities.
• Pandemic Necessity: The COVID-19 crisis highlighted MGNREGS as a crucial lifeline for both rural workers and migrant laborers returning to rural areas, underscoring its relevance in times of crisis.
• Declining Allocations: Despite its importance, budget allocations for MGNREGS have decreased significantly since the pandemic, from 3.2% in FY21 to 1.78% in FY25 (BE), raising concerns about its sustainability.

Implementation Challenges and Shortages

• Budget Deficit: The Rural Development Ministry faces a shortfall of Rs 4,315 crore for wages, and the Centre has a Rs 5,715 crore liability for the material component, affecting the scheme’s ability to function effectively.
• Wage Delays and Demand Suppression: Wages under MGNREGS have been delayed, leading to suppressed demand for the scheme's services, further undermining its impact.
• Inadequate Fund Allocation: While the scheme is demand-driven, the lack of additional funding in the current financial year hampers its capacity to meet the needs of rural workers.

Core Issues in MGNREGS' Effectiveness

• Inflation Adjustments: There is a need to adjust wages to match inflation to ensure that the scheme remains relevant and effective for rural workers.
• Aadhaar-Based Payment System: Issues with the seeding of job cards with the Aadhaar system have created obstacles in the timely disbursement of wages.
• Insufficient Funds: The reduction in funding threatens the core objective of the scheme — providing demand-driven employment for rural workers, particularly during off-seasons in agriculture.

The Way Forward for MGNREGS

• Importance in Rural Poverty Alleviation: MGNREGS plays a vital role in addressing rural poverty by providing income and creating valuable assets like irrigation canals, rural roads, and water conservation facilities.
• Revamping Government Approach: The Union government must revise its attitude towards MGNREGS and provide a substantial budget allocation that reflects the actual demand for the scheme.
• Ensuring Long-Term Sustainability: Adequate funding and policy adjustments, including wage inflation adjustments and resolving administrative issues, are essential for ensuring the long-term sustainability and impact of the scheme.

Practice Question

Q. Evaluate the effectiveness of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) in addressing rural poverty in India. How can the Union Government improve its implementation and funding?