MGNREGA work demand 'not linked' to rural distress: Economic Survey

Data does not show that states with more poverty and higher unemployment rates use more of the scheme's funds, it says

The Economic Survey for FY24 on Monday sought to discount the argument that links work demand under MGNREGS, the flagship rural employment guarantee programme, with people’s distress

The Survey said that if that was the case then data trends should show that states with more poverty and higher unemployment rates use more of the scheme’s funds and generate more employment person-days.

Additionally, there might be a correlation between MGNREGS, short for Mahatma Gandhi National Rural Employment Guarantee Act/ Scheme, fund usage and reduced unemployment.

It said past studies have attempted to correlate MGNREGS demand with weather data to indicate real-time rural distress but such hypothesis needs verification.

The survey said that in FY24 Tamil Nadu had less than 1 per cent of the country’s poor population, but accounted for nearly 15 per cent of all MGNREGS funds released. Kerala, with only 0.1 per cent of the poor population, used almost 4 percent of MGNREGS funds.

Together, these states generated 51 crore person-days of employment.

In contrast, Bihar and Uttar Pradesh, with about 45 per cent (20 per cent and 25 per cent, respectively) of the poor population, accounted for only 17 per cent (6 per cent and 11 per cent respectively) of MGNREGS funds and generated 53 crore person-days of employment.

The survey said that when the correlation coefficient between state-wise multidimensional poverty index and person-days generated is calculated, it indicates that MGNREGS fund usage and employment generation are not proportional to poverty levels.

Additionally, calculations reveal that there is little correlation between MGNREGS fund usage and rural unemployment rates. Data from FY23 shows that states with the highest rural unemployment rates did not necessarily use the most MGNREGS funds.

Contrary to the popular narrative, data does not support the idea that states with high rural unemployment rates in FY22 sought more MGNREGS funds in FY23.

The survey concluded that it is evident from data that MGNREGS work demand does not directly correlate with increased rural distress at a micro level.

The evolution of MGNREGS as work of last resort for village families to become more of a smart choice for household asset creation and sustainable income generation has also been noted previously. “This indicates that other important aspects must be factored in to explain the state-level differences in fund usage,” said the survey.