Despite huge outlay, Rs 15,000 cr MGNREGA dues may spill over to FY23

Expenditure on the MGNREGA scheme in FY22 is pegged at 1,13,311.23 cr, so even if the Centre uses all if the Rs 98,000 cr allocated to the scheme, a huge sum will remain uncleared.

For the second year running a significant amount by way of MGNREGA dues could be carried forward to the next year as unpaid dues. This is despite the fact that the Centre has allocated nearly Rs one trillion to the flagship scheme.

Over 70 million households have got work under the scheme for the second year on the trot in FY22. Prior to this, about 50-60 million households worked under MGNREGA, data shows.

Continuing demand for MGNREGA work in rural areas also reflects the slow pace of economic recovery and job creation in the hinterland post the pandemic, something which is also manifested in the slow growth of real rural wages, FMCG and two-wheeler sales.

Activists and people associated with MGNREGA said that at the current pace of fund release, even if the Centre clears all the estimated Rs 98,000 crore for FY22, around Rs 15,311 crore could still be carried forward to the next year.

This is because the MGNREGA website say that till March 22, expenditure on the scheme, which also includes unpaid dues from previous years, is estimated to be around 1,13,311.23 crore.

This will leave around Rs 15,311.23 crore even if the Centre clears all of its own Rs 98,000 crore in accordance with the Revised Budget Estimate of the scheme for FY22, tabled in Parliament in February.

Of course, this carry-forward can come down if states release their share of the Budget before March 31, but given that fewer than 10 days are left for the financial year to end, this looks highly unlikely, civil society activists said.

Fund crunch next year

If the current pace of work demand spills over to FY23 and 70 million households again look for work under the scheme, then conservative expenditure estimates show that based on FY22 data on the average cost per person and number of days of work provided, the estimated expenditure on the scheme should come to somewhere near Rs 1.05 trillion.

The FY23 Budget for MGNREGA has been pegged at Rs 73,000 crore, of which a minimum Rs 15,000 crore could be spent on clearing this year’s pending dues.

This means some Rs 58,000-60,000 crore will be left for taking up new work in the next financial year.

“This will also mean that the Budget for FY23 will last for just about 5-6 months. This has been the case with MGNREGA during the past several years, and the scheme has needed fresh infusion of funds midway into the financial year, otherwise demand could be artificially suppressed or due clearance delayed to kill the demand,” Debmalya Nandy of the MGNREGA Sangharsh Morcha told Business Standard. 

The Centre had budgeted Rs 73,000 crore for MGNREGA in FY22, but ended up spending almost Rs 98,000 crore due to continued robust work demand.

Similarly, in FY21, which is considered a landmark year for the scheme due to the sudden spike in demand caused by reverse migration of millions of labourers from cities to villages after the first lockdown, the Centre spent a record Rs 1,11,170 crore for MGNREGA. This was despite the fact that it had budgeted for much less.

Real rural wage growth

If MGNREGA demand has been robust for the second year running in FY22, one big reason could be limited avenues for the labour force to find meaningful work in rural India and continued economic distress there.

Latest data from the Labour Bureau showed that iln January 2022, real rural wage growth (for general agriculture labour-male) contracted by 0.10 per cent due to rise in inflation.

“Low wages in rural India mean low consumption and low demand for goods, which in turn means low production and low jobs. This vicious cycle needs to be broken,” Himanshu, associate professor at Jawaharlal Nehru University (JNU) had told Business Standard some months back.

S Mahendra Dev, director and vice-chancellor of the Indira Gandhi Institute of Development Research (IGIDR) had then said the slight improvement in real rural wage growth was not much when compared to the times when annual growth in wages was somewhere around 5 per cent.

Not only that, two-wheeler sales and the consumption of fast-moving consumer goods in rural India have been rather tepid during the first few quarters of this financial year.