Economy

Why most MGNREGA households won’t earn additional ₹2,000 promised by FM

Tina Edwin New Delhi | Updated on April 01, 2020 Published on April 01, 2020

The amount required is nearly five times the outlay of ₹61,500 crore made in the Union Budget for 2020-21   -  Special_arrangement

The likelihood of all job card holders demanding work under the scheme is low

The government will need to spend about ₹3-lakh crore in 2020-21 in wages if all 13.62 crore rural households that hold job cards under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) are to be provided with 100 days of employment to enable them to earn ₹2,000 more on an average in the current fiscal.

The amount required is nearly five times the outlay of ₹61,500 crore made in the Union Budget for 2020-21, and is equivalent to the total expenditure envisaged on agriculture and allied activities and rural development during the year.

The combined wage bill of Bihar and Uttar Pradesh alone will be in excess of ₹65,000 crore if all households that have MGNREGA job cards in the two States are provided 100 days of employment in 2020-21.

Each of these two States has about 1.65 crore households holding the MGNREGA job cards currently. Wages for a day’s work was revised to ₹194 in Bihar and to ₹201 in Uttar Pradesh for 2020-21 in an annual exercise where revisions are linked to inflation. The latest revision in wages was the highest increase made by the NDA government since it came to power in May 2014.

The wage bill could be as much as ₹25,000 crore in West Bengal for MGNREGA work and between ₹20,000 crore and ₹23,000 crore in Maharashtra, Andhra Pradesh, Tamil Nadu and Rajasthan if all the job card holders are given 100 days of employment. The seven States account for 8.14 crore, or 70 per cent, of the MGNREGA job card holders currently.

Together, they will also account for 59 per cent of the wage bill if all households with a job card are provided 100 days of work.

All job card holders don’t demand work

However, such a situation where all households demand work will not arise. This is partly because the MGNREGA wages are almost half of the minimum wages for the unskilled agriculture workers. Households enrol for job cards as they serve as an identity card in rural areas to access banking as well as other government-provided services and benefits.

In 2019-20, for instance, just about 45 per cent of the job card holders demanded work and almost all were offered some work. A small proportion of those offered work chose not to take the employment provided.

What is of significance is the ability of State governments to provide those demanding work with adequate days of employment. While those demanding work are entitled to 100 days of work, the number of days of work provided since 2015-16 has exceeded 50 days on an average per household only in 2018-19, the year in which vast swathes of the country experienced a drought.

Thus the wage bill in the current year and the benefit of revised wages reaching households depend on a number of variables — the number of households demanding work, number of people provided work and the number of days of work.

The likelihood for 100 per cent MGNREGA households demanding work and getting 100 days of work is low. Thus, neither will the wage bill rise to ₹3-lakh crore nor will 13.62 crore households get the benefit of ₹2,000 additional income, as estimated by Finance Minister Nirmala Sitharaman while announcing the Garib Kalyan Yojna.

But with large number of migrant workers returning to rural areas following the lockdown to contain the spread of Covid-19 pandemic, there could be a rise in enrolment of MGNREGA job card.

The convergence of MGNREGA with other schemes for rural areas such as Pradhan Mantri Awas Yojna – Gramin may also create demand for work and therefore push up the wage bill. The convergence of scheme means that households will be entitled to MGNREGA wages for self-building a house under PMAY-G or a livestock shelter while the cost of material will be provided from the other scheme.

Published on April 01, 2020

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