Is the drop in MGNREGA work demand a sign of improving rural job markets?

Civil society activists and people working on the ground, however, believe that the decline in work demand is artificially created due to fund shortages for the programme

Demand for work under the flagship Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) slumped in August 2024. Data shows that in the month, around 16.06 million households sought work under the scheme, the lowest monthly demand since October 2022.

Though this number is still higher than pre-Covid levels, it suggests an improvement in rural job markets from various angles.

The active monsoon and the surge in kharif sowing activities this year could also be a reason behind the dip in demand as manual casual labourers could be getting better work somewhere else.

Distress employment scheme

Several experts concur that MGNREGA is a distress employment scheme. A drop in demand indicates that fewer people are seeking temporary work at low wages compared to other occupations.

Data shows that throughout FY24, the number of people seeking work under the scheme progressively decreased each month.

Civil society activists and people working on the ground, however, believe that the decline in work demand is artificially created due to fund shortage for the programme.

This means that when wages are delayed or funds don’t reach the actual beneficiaries on time, their interest in the programme wanes.

There are also allegations that actual demand is not being captured at the panchayat level to keep budgetary outgo within limits.

Technological interventions such as Aadhaar-based attendance systems, mandatory Aadhaar-linked bank accounts for payments, GPS tracking of worksites, etc., have also discouraged workers from seeking employment under the scheme.

Research by LibTech India shows that the percentage of workers added shot up during FY21, when the pandemic was at its peak, and migrant workers returned home in large numbers, needing MGNREGA’s guaranteed employment.

In FY23, the percentage of workers deleted coincided with the Ministry of Rural Development’s mandate of Aadhaar wage payments in MGNREGA, as officials aimed to meet Aadhaar-job card linking targets.

Libtech in an article published in EPW showed that in FY 23, around 19 per cent of total registered workers were deleted while 4.55 per cent were added as new workers. 

It was easier for them to delete unlinked workers than to include them in the system, the research showed.

LibTech India identifies itself as a team of engineers, social workers, and social scientists interested in improving public service delivery in India.

The missing Bengal

One major drawback in arriving at any conclusion about MGNREGA work demand and rural distress is the absence of 10-15 million regular MGNREGA workers from West Bengal from the calculations.

Data shows that the work demand in nearly the last two years does not account for the number of workers from Bengal, as the state has not released any funds.

In a parliamentary reply in July 2022, the Ministry of Rural Development said that due to non-compliance with its directives, as per Section 27 of MGNREGA, the release of funds to the state of Bengal was stopped. At that time, pending liabilities for MGNREGA wages were estimated at Rs 2,605 crore.

The Paschim Banga Khet Majdoor Samity (PBKMS), which has long fought for the rights of MGNREGA workers in Bengal, stated that the denial of wages amounted to criminalisation and punishment of the 10-15 million MGNREGA workers in the state for no fault of theirs. Therefore, the work demand numbers will only show a complete picture when Bengal workers are added to the all-India figures.

That aside, questions remain as to whether MGNREGA work demand is a true reflection of rural distress.

Economic Survey and job-demand numbers

The Economic Survey 2023-24, tabled in Parliament a few months ago, sought to debunk the link between MGNREGA work demand and rural distress.

It argued that if there were a link, data should show that states with more poverty and higher unemployment rates used more of the scheme’s funds and generated more employment person-days.

Citing FY24 MGNREGA data, the Survey highlighted that Tamil Nadu, with less than 1 per cent of the country’s poor population, accounted for nearly 15 per cent of all MGNREGA funds released. Similarly, Kerala, with only 0.1 per cent of the poor population, used almost 4 per cent of the nation’s MGNREGA funds. Together, these states generated 510 million person-days of employment.

In contrast, Bihar and UP, with about 45 per cent of the poor population (20 per cent and 25 per cent, respectively), accounted for only 17 per cent (6 per cent and 11 per cent, respectively) of MGNREGA funds and generated 530 million person-days of employment.

Additionally, the Survey pointed out that when calculating the correlation coefficient between state-wise multidimensional poverty index and person-days generated, MGNREGA fund usage and employment generation are not proportional to poverty levels.

Chakradhar Buddha, senior researcher at LibTech India, told Business Standard that the decline in MGNREGA work demand is due to multiple factors, with the Union government’s rationing of work under the programme being a key contributor.

Despite predictions that rising household debt would increase MGNREGA demand, the data contradicts this, he said.

“The Union government’s Economic Survey 2024 acknowledges that true MGNREGA work demand is not fully reflected in the Management Information System (MIS). This is partly because officials often avoid acknowledging work demands to prevent delays and subsequent unemployment payments,” Buddha said.

He added that this situation highlights a shift in MGNREGA’s operation: from being a demand-driven programme, it has become supply-driven, with the Union government restricting work availability.

Citing an example, Buddha said that in May 2024, the Ministry of Rural Development criticised the Andhra Pradesh and Telangana governments for allegedly violating MGNREGA guidelines and for the sharp rise in work demand.

According to Buddha, this criticism could be seen as a subtle directive for states to reduce work provision, which became evident from the subsequent decline in MGNREGA activities in both states.

“Field reports from Gujarat also indicate that work has been temporarily halted due to issues with the wage-to-material ratio. These examples suggest that MGNREGA demand is being suppressed through various bureaucratic and regulatory constraints,” he said.

“Regardless of any perceived rule violations by state governments, workers should not suffer due to these administrative decisions. MGNREGA legally guarantees 100 days of employment per household, and if work is not provided, unemployment allowances must be paid. These legal commitments should be upheld despite bureaucratic obstacles or intergovernmental disputes,” Buddha added.

CSC Sekhar, professor of economics at the Institute of Economic Growth, University of Delhi, said in August 2024, around 16.06 million households and 18.9 million workers sought work under the scheme. This is probably the lowest since October 2022. There has been a month-on-month decline (compared to 2023) for all the months of 2024 so far. This is due to a much better monsoon this year compared to 2023. This better performance of the monsoon led to an increase in demand for labour for kharif sowing, leading to a lowering of MGNREGA demand. This could also be partly due to higher growth in non-agricultural activities, particularly construction.

“However, it needs to be noted that MGNREGA demand is still higher than average demand between 2014-15 and 2018-19. So, we cannot draw firm conclusions about the rural economy or distress, at least not yet. This could be a purely monsoon-induced improvement,” Sekhar told Business Standard.

Now, if the rise in MGNREGA work demand is not a true reflection of growing rural distress, then can a drop in demand be attributed to improvement in the rural sector? Or, does it need a deeper evaluation?