Avert hunger: Continue free rations and MNREGA jobs

The Union government has said that the free distribution of food grain as part of the Pradhan Mantri Garib Kalyan Yojana (PMGKY-3) will come to an end on November 30. As winter sets in, this hasty decision could cause tremendous misery to the poor.

The scheme was initially launched in March 2020 to address the food distress caused by the Coronavirus (Covid-19) pandemic for the period April 2020 to June 2021. Extending the scheme for another five months on June 30, Prime Minister Narendra Modi had declared, “Let there not be a single home where the hearth is not blazing” and that the government was “standing by the poor in their every need, as their partner.” Government officials justify discontinuation of free rations claiming signs of economic revival.   

Nevertheless the situation in rural India seems to remain grim. The only social security net, the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) scheme, is unable to meet the demand for guaranteed employment of 100 days to one person in a household in a year. In this fiscal year 13.25 per cent of households that applied for MNREGA did not get any employment, according to the activists of the trade union Mazdoor Kisan Shakti Sangathana (MKSS). Of the 67.7 million people demanding work under MNREGA only 58.7 million got employment according to MKSS’s Dey quoting findings of the People’s Action for Employment Guarantee. This is probably an underestimate because it only captures those who formally registered on the MIS (Management Information System) of the MNREGA. There is no other unemployment allowance for those left out of the MNREGA scheme.

Activists blame an alleged reduction in budget allocation for the unmet demand for employment under MNREGA. In the previous fiscal year the budget was revised upward to Rs 1.11 trillion to ameliorate the effects of the pandemic on the rural economy. This year the Union Budget has revised its allocation downwards to Rs 73,00 crore, a drop of 34 per cent.

The demand for what is essentially survival employment under the scheme remains high. Over two crore households availed of the MNREGA in September alone which is 3.85 per cent higher than for the same month in 2020 and 72 per cent higher than in the non-Covid year of 2019.In the first half of this financial year (2021-22), the average number of households under MNREGA was 23.6 million, higher than the 22.8 million in the entire FY 2020-21 and 15.6 million in 2019-20. The demand for MNREGA is clearly not abating in rural India.

However, the MNERGA in most states is on the verge of closure, having run out of funds. Overall, the MNREGA scheme shows a negative net balance of Rs 8,686 crore half way through the fiscal year.

Of the 35 states/Union Territories, 21 have already utilised 100 per cent of the funds allocated to them for the scheme. Even better off states like Kerala, Tamil Nadu, Andhra and Himachal have utilised up to 130 per cent of their respective allocations. This points to the persistence of rural distress. States do not themselves have the funds to continue with the scheme and are turning away those seeking wage work under the MNREGA. The Union government however is accusing states of pushing the demand “artificially”.

MNREGA is a demand driven scheme and the negative net balance must spur the government to make supplementary budget allocations when Parliament convenes for its winter session. One expects that this will happen, especially given the state assembly elections early next year. Experts have warned the government that unless the scheme is funded with additional budgetary allocation, increasing rural distress could lead to a decline in rural consumption which plays a crucial role in stimulating the economy.

The only good news from rural India is that September showed a sudden rise in employment which can at least partially be attributed to MNREGA. According to the latest report of Centre for Monitoring Indian Economy (CMIE), India’s employment rate increased from 37.15 per cent in August to 37.87 per cent in September. Of the 8.5 million increase in jobs indicated, 6.5 million were in rural India which CMIE termed “an extraordinary increase in the month of September when the demand for labour from agriculture is usually low.” It argues that agriculture may have contributed to an additional 0.55 million, but the remaining 6 million have to be non-farm rural jobs – possibly from road construction activities and “some acceleration in employment” under the MNREGA scheme.

The situation in urban India also remains grim. There is no reliable data about the proportion of migrant workers in the informal sector who lost jobs during the two Covid waves, or whether they slid down the income ladder if they found new ones. A PTI report quotes Pronab Sen, eminent economist and former chairman of National Statistical Commission to suggest that this may be the case, “The cascading effect of demonestisation five years back and the two Covid lockdowns in two years have been devastating for the informal sector, whose ability to transact business has been badly hurt … as a result employment, quality of jobs and incomes have fallen drastically.” The report points to a decline in the quality of employment with skilled workers pushed to become street vendors or take up unskilled jobs to survive.

At a time like this when the poor are barely beginning to get their household economy together, any weakening of their twin lifelines – free rations and MNREGA – would be grossly insensitive. The Delhi government has done well by extending the free rations scheme for another six months on its own. The Union government would do well to follow its lead. Also, adequate provisions for the MNREGA scheme must be made through supplementary budget allocations to sustain the rural poor. It is better to err on the side of caution than to pretend that everything is normal and that the economy will soon be back pre-Covid days.