While the Centre insists that the MGNREGS is a demand-driven scheme and additional funds are given when required, no upward revision was made in the ongoing financial year.
| Photo Credit: V. Raju

At a time when the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the flagship rural employment programme, is running on a deficit of ₹9,754 crore, there has been no hike in fund allocation in the 2025-26 Budget.

In FY 2025-26 Budget, ₹86,000 crore has been allocated for the scheme, which is same as the budget allocation for 2024-25. While the Centre insists that the MGNREGS is a demand driven scheme and additional funds are given when required, no upward revision was made in the ongoing financial year.

Therefore, Budget Estimate 2024-25, Revised Estimate 2024-25 and the Budget Estimate 2025-26 are the same at ₹86,000 crore. A significant amount of the budget each year is spent in covering the dues of the previous financial year. The pending dues of West Bengal is around ₹7,500 crore. If the issue is resolved this year, the allocated budget will further decrease.

The legislation dictates that the workers have to be paid their wages within 15-days of doing the work. But due to the allocation, the Centre will not be able to meet this deadline. 

Delay in wages

“The ongoing financial year has another three-months to go. The programme is already running on a deficit. This means that for the next three months wages will be further delayed. Significantly, with such low allocation, the scheme will be rationed in the next FY leading to artificial suppression of demand,” Nikhil Dey, Founder Member of Mazdoor Kisan Shakti Sangathan.

The low allocation is directly related to suppression of demand. The Economic Survey had said that the employment was often unavailable when sought. The Act mandates that the worker should be provided unemployment allowance if work is not provided within 15-days of raising the demand. However, the Survey noted that the “work demanded is only reported on the portal when employment is actually provided.” Thus the real demand for the MNREGS work is never captured. 

“The government has repeatedly asserted that it is a demand-driven programme and they appropriately revise the budget to meet the demand. But if that was the case, how do they explain the fact that no additional allocation was made in 2024-25, which is unprecedented? This is reflected in the negative balances reported by most States, showing that funds are running out while demand remains unmet,” Chakradhar Buddha senior researcher at Lib Tech, a consortium of academics and activists.

He also pointed out that the budget allocation also does not factor in inflation. 

Village women work under MGNREGA scheme at Jagannath Prasad village in Odisha
| Photo Credit: Gerra Madhusudan 10751@Chennai

The share of the Union Budget allocated for the social sector has declined rapidly in recent years. Data show that the outlays to most schemes under the rural development, education, health, and social welfare heads have either declined or stagnated.

Table 1 shows the allocations for various social sectors as a share of the total Budget.

Expenditure on health as a share of the total Budget declined from 2.47%-2.22% in the FY18-22 period to 1.85%-1.75% in the FY23-25 period. The share of the total Budget allocated to the Ministry of Rural Development did not cross the 6%-mark in the last three years, which was the case for many years prior.

Similarly, allocations for higher education as a share of the total Budget declined from the 1.57%-1.37% range in FY17-20 to 1.27%-0.88% in FY21-25. Allocations for school education declined from the 2.18%-1.96% range to 1.61%-1.23% and allocations for social welfare schemes declined from the 1.89%-1.61% range to 1.17%-0.97% in the same period.

The reduced allocations can be better understood at the scheme level. Table 2 shows the allocations for various social sector schemes as a share of the total Budget.

Notably, allocations for schemes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), introduced under the United Progressive Alliance government, have declined significantly over time.

The ₹86,000 crore (Budget Estimates) allocated for MGNREGS for 2024-25 formed only 1.78% of the total Budget, a 10-year low. Latest data show that the Rural Development Ministry was short of ₹4,315 crore, which resulted in a delay in the disbursement of wages to MGNREGS workers.

Allocation for the national social assistance programme, which includes old age pension, widow pension, and disability pension, has declined as a share of the total Budget from the range of 1.21%-0.36% in the years FY19-21 to about 0.2% in the last four years.

The allocations for the Pradhan Mantri Poshan Shakti Nirman (PM-POSHAN) scheme as a share of the total Budget declined to 0.26% in FY25 (Budget Estimates) — the lowest in the last nine years — except FY24 (Revised Estimates).

The primary objective of the scheme is to improve the nutritional status of children studying in Classes 1 to 8 in eligible schools. It was earlier known as the National Programme of Mid-Day Meals in Schools.

There were some exceptions to this trend: allocations under the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY), the Pradhan Mantri Awas Yojna (PMAY)-Rural, and PM Schools for Rising India (PM SHRI) as a share of the total Budget were on an increasing trend or at least stagnating. Notably, all these schemes were launched post 2014.

With the Budget for the next financial year set to be presented on February 1, it will be crucial to examine how the declining allocations for the social sector are being addressed. The sector has under its umbrella a host of important schemes, as shown in Table 3. The table shows major expenditure heads under each social sector.

The number in the table corresponds to a scheme/expenditure head’s share in each sector’s total budget. For instance, about 33% of the health budget for the current year went to a flexible pool to be used by States for their health needs and 20.6% was allocated to autonomous bodies such as AIIMS. Close to half of the rural development budget was given to MGNREGS and over 30% went to PMAY-Rural.

Source: The data for the charts were sourced from Union Budget documents

sambavi.p@thehindu.co.in

vignesh.r@thehindu.co.in

samreen.wani@thehindu.co.in

According to some estimates, as on February 1, the Centre owes ₹ 16,000 crores in wages under MGNREGS to the State governments. File
| Photo Credit: S. Harpal Singh

 With allocation of ₹86,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the budget for the scheme for the financial year 2024-25 has been hiked by ₹26,000 crore in comparison to the 2023-24 Budget estimates, though it is the same as the revised estimates for the ongoing financial year (2023-24). So, the net gain for the rural employment scheme could be zero or even negative. 

As per the statistics available on the Union Rural Development Ministry website, the total expenditure on the programme so far has been ₹88,309.72 crore. According to some estimates, as on February 1, the Centre owes ₹16,000 crore in wages to the State governments.

The government has argued that MGNREGS is a dynamic scheme and the dues are cyclically paid. But for the last two years, the Centre has halted the programme in West Bengal, claiming corruption in implementation of the scheme. The Centre owes nearly ₹7,000 crore to the State.

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The 2024 Budget, though, breaks the continued trend of slashing the budget for the programme. In the 2023 Budget, only ₹60,000 crore was allocated which was 18% lower than the ₹73,000 crore Budget estimates and 33% lower than the ₹89,000 crore revised estimates for financial year 2023-24 for the scheme.

But the activists and academics said the allocation still fell way short of the sum required for efficient implementation of the programme. “Matching the revised estimates is a tacit acknowledgement of rural distress. But it takes no step to alleviate it. Simple calculation points out that considering 5.6 crore households are registered under the programme, this sum can provide for 25 to 30 days at most of work in a year,” Rajendran Narayanan, Professor at Azim Premji University, said.  

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The allocation furthers the trend of spending 15 to 20% of the budget clearing the past dues, in the present case this includes ₹7,000 crore owed to the West Bengal government. “To meet the employment needs of registered households under MGNREGS, a crucial ₹3 lakh crore is essential. However, the allocated budget falls significantly short at a mere ₹86,000 crore. Considering the outstanding dues in West Bengal that need clearing and the additional work requirements for the workers in the State this year, coupled with the historical trend of 15 to 20% of the budget being spent on clearing past dues, the allocation seems increasingly inadequate. This shortfall raises serious concerns as it not only jeopardises the guaranteed right to work under MGNREGS but also constitutes a gross violation of this fundamental entitlement,” Chakradhar Buddha, who is affiliated with LibTech India, a consortium of academics and activists, said. 

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Working under MGNREGS: Women workers begin desilting work as part of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) at Nidigattu village near Bheemunipatnam in Visakhapatnam district on April 23, 2020
| Photo Credit: DEEPAK KR

From being called a “living monument of failure” to “digging holes,” the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has long been subject to harsh criticism by the ruling dispensation. While the NDA government hasn’t done away with the UPA’s legacy scheme, payment delays, technological imposition and paucity of funds have left the programme in a state of disrepair.

For instance, the Centre is yet to clear wages worth thousands of crores in West Bengal and Rajasthan. The recently introduced Aadhaar-based payment system (ABPS) will impact close to 80% of workers in Maharashtra who are yet to complete the relevant formalities. Also, the Budget allocated to the scheme was slashed by 33% for FY24.

Despite the steep cut, Union Rural Development Minister Giriraj Singh recently claimed that the allocations were higher than what was given during the UPA regime. Chart 1 shows that the allocation formed only 1.3% of the total budget in FY24, the lowest-ever. The share peaked at 3.4% in FY09.

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From February 1, 2023, payments to MGNREGS beneficiaries were to be made only through ABPS. However, as on February 20, only 44% of the total workers in India were eligible for ABPS. In 14 States, more than 50% of workers were not eligible. In Rajasthan, Uttar Pradesh, Bihar and Maharashtra, where more than 2 crore workers each are enrolled under the scheme, over 60% were not eligible. Chart 2 shows the State-wise share of workers who were not eligible for receiving payments through ABPS as on February 20. States have been divided into four categories based on the number of workers enrolled in MGNREGS.

Rajendran Narayanan, a faculty member at Azim Premji University, said, “Till the workers link their job cards and bank accounts with Aadhaar, they will not be allowed to take up MGNREGA work. That can have serious consequences because it takes time to do this process and this is the peak season of MGNREGA. Also, rectifying errors in the Aadhaar-based payments is nearly impossible for the workers and field officials.”

MGNREGS also suffers from inordinate delays in payment of wages. The payment process has two stages. Stage 1, which is the States’ responsibility, involves creating a Funds Transfer Order with worker details. This is sent in digital format to the Centre. Stage 2, which is the Centre’s responsibility, involves processing the Funds Transfer Orders and transferring the wages to the worker’s account. Chart 3 shows the wages (in Rs. crore) that were not yet processed by the States and the wages that were yet to be cleared by the Centre as on February 25. For instance, in Rajasthan, nearly Rs. 78 crore or 1.5% of total transactions is yet to be processed at the State level, while the Centre is yet to clear dues worth Rs. 1,138 crore or 18% of all transactions. In West Bengal, close to 98% of transactions worth Rs. 2,897 crore are pending with the Centre.

Further, several States such as West Bengal, Madhya Pradesh, Tamil Nadu, Andhra Pradesh, Maharashtra and Nagaland are running negative balances with payments pending for wages and material. This makes it difficult for them to take up new work. At the same time, they have pending payments ranging from Rs. 200 crore to over Rs. 1,000 crore. In Gujarat, Telangana, Bihar, Rajasthan and Uttar Pradesh, while the existing balance is positive, the pending payments far exceed the balance, which if cleared, will push the States into negative territory. Chart 4 shows balance remaining with States and payments that are due in Rs. crore.

Source: MIS reports, budget documents and the Ministry of Rural Development

nihalani.j@thehindu.co.in

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A farmer spreads fertilizer in a field, at a village in Madurai.
| Photo Credit: PTI

Globally, there is a twin crisis in agriculture: in food and in fertilizers. On the one hand, there are fears of a fall in the global production and availability of food. The rise in food inflation has been an area of serious concern for the government and the Reserve Bank of India. On the other, global fertilizer prices have risen by about 200% over the past two years. Consequently, the prices of fertilizers and other farm chemicals in India have also shot up.

Domestically, the Union government has the unenviable task of explaining why it failed to double the real incomes of farmers between 2015 and 2022. Official data show that real incomes from cultivation have fallen in absolute terms after 2015. Between 2020-21 and 2022-23, annual growth rates in agriculture and allied sectors have been stagnant between 3% and 3.5%. Agricultural exports have risen, but the impact of this has been insignificant outside a handful of commodities.

Thus, the objectives of the Budget could be formulated as two-fold: one, it must have protected farmers and consumers from the food and fertilizer crises; and two, it must have taken steps to raise net incomes from cultivation.

Disappointing allocations

It was widely expected that food and fertilizer subsidies would be retained or increased. The restructuring of the food distribution guidelines, which effectively ended a part of the free supply of food grains under the Pradhan Mantri Garib Kalyan Anna Yojana, was a disappointment even prior to the Budget. The Budget has reaffirmed that stance and cut food subsidy from ₹2.87 lakh crore in 2022-23 (RE) to ₹1.97 lakh crore in 2023-24 (BE). Fertilizer subsidies have also been cut from ₹2.25 lakh crore to ₹1.75 lakh crore. In effect, these cuts will expose farmers to the vagaries of the global market and render the economics of agriculture more fragile. Landless households in rural areas are also likely to be affected adversely, as the allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme has been cut from ₹73,000 crore in 2022-23 (BE) to ₹60,000 crore in 2023-24 (BE).

The cut in fertilizer subsidies will increase the costs of cultivation for farmers, but there is no amelioration to be expected from a compensatory rise in output prices. The rise in minimum support prices between 2020-21 and 2021-22 just covered for the rise in input costs and did not leave any space for higher net incomes.

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There has been no solace on the production front too. Yields in agriculture remain low. Rising fertilizer prices have led to lower consumption of fertilizers in farms, leading to imbalanced nutrient application and even poorer prospects of yield rise. The government, on the other hand, has been promoting variants of “natural farming”. The Budget has even allocated ₹459 crore to a new National Mission on Natural Farming. But natural farming has no scientific validation and is likely to reduce crop yields by 25-30%. If yields fall, how can farming stay viable in the face of rising input prices and stagnant output prices?

Capital expenditure

Amidst all the talk of raising capital expenditure, agriculture presents us with a story of utter neglect. Capital investment is required in agriculture not just for irrigation but also to build/improve agricultural markets (mandis). The total capex of the government in 2022-23 was ₹7.5 lakh crore, but allocation under the capital accounts of crop husbandry, animal husbandry, dairy and fisheries was just ₹119 crore. In 2023-24, this is expected to fall to ₹84.3 crore. Under the capital account of irrigation and flood control, the budgeted allocation in 2022-23 was only ₹350 crore, which is slated to fall to ₹325 crore in 2023-24. The Agriculture Infrastructure Fund (AIF) is another much-touted scheme. The budgeted allocation for AIF in 2022-23 was ₹500 crore, of which only ₹150 crore was spent. In 2023-24, the allocation of ₹500 crore has been retained.

The Finance Minister made a series of other announcements on agriculture in her speech, but the allocations for these schemes or scheme components are not listed in the Budget documents. Essentially, all these are fragmented allocations thinly spread across diverse departments with only an indirect or marginal impact on the agricultural sector. Good examples are the Agriculture Accelerator Fund, PM-Pranam, GOBARdhan, Bhartiya Prakritik Kheti Bio-Input Resource Centres, Mishti, and Amrit Dharohar. There was much time spent in the speech on millets too, but without any explicit allocation other than in upgrading a Centre for Excellence in Hyderabad. There was yet another announcement on a targeted investment of ₹6,000 crore under the Pradhan Mantri Matsya Sampada Yojana, but the actual increase in allocation in the Budget papers is only ₹ 121 crore.

The Budget fails to address the most pressing problems in Indian agriculture. The lack of a scientific and grounded vision, which must have ideally driven the quantum and direction of allocations, is telling.

R. Ramakumar is Professor at the Tata Institute of Social Sciences, Mumbai