What explains the 11% decline in demand for MGNREGS employment in April?

The unprecedented crisis triggered by the pandemic during the first lockdown in March 2020 had forced more than 10 million migrant workers to return to their villages.
 
Most of them, unable to find sustenance in agriculture during the lean season, took refuge in MGNREGA schemes. This shot up the demand for the rural job guarantee programme.
 
MGNREGA guarantees at least 100 days of wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work.
 
Provisional data for the month of April indicates a turnaround in the employment situation in rural areas. The number of households seeking work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in April was 11.15% lower than the numbers in the same month last year.
 
Nearly 23.26 million households sought work under the scheme compared to 26.18 million households last year. 
As economic activities picked up, workers are once again migrating back to urban areas.
However, a disproportionately large number of people are still seeking work under the scheme. In the comparable pre-pandemic months 16-17 million households demanded MGNREGA work.

Talking to Business Standard, S Mahendra Dev, Director, Indira Gandhi Institute of Develop­ment Research (IGIDR) says demand declined partly due to an increase in urban employment. While economic activity has still not caught up to the pre-pandemic level, contact-intensive sectors are recovering to normalcy. Non-form activities in rural areas may have improved, he says curtailing govt expenditure could lead to lesser jobs creation. 

Business Standard recently reported that the finance ministry has asked various line ministries and departments responsible for implementing subsidy and welfare schemes to cut wasteful expenditure expeditiously and to plug leakages.
 
The number of MNREGA beneficiaries rose to around 70 million when the economy slumped during pandemic lockdown, up from 50 million before the lockdown. Policymakers at the centre are reportedly concerned that the figure has not come down to pre-pandemic levels yet.

Chakradhar Buddha, a researcher at study group LibTech India, said the work demand data pointed towards the fact that “we haven’t come back to pre-pandemic normal economic activities in rural areas”.
 
An official told Business Standard that departments have been asked to map the most backward districts and compare them with relatively developed ones.

“If a developed district in a state has more beneficiaries than an aspirational district, it means there are ghost beneficiaries of welfare schemes,” the official said.
 
Meanwhile, civil society activists have been pointing out that the money allocated for the programme in the Budget FY23, at Rs 73,000 crore, is inadequate and could lead to demand getting artificially suppressed.
 
The actual expenditure could be lower because a significant part, almost 20,000 crore rupees, could be spent on clearing the dues of FY22.
In FY22, the Centre had budgeted 73,000 crore rupees for MGNREGA but ended up spending almost 98,000 crore rupees.

According to Nikhil Dey, Founder Member, Mazdoor Kisan Shakti Sangathan (MKSS), demand is a reflection of the amount of money available in the system. The main reason for the fall in demand is the squeezing of funds by Centre, and regardless of economic recovery, there is a huge unmet demand, he says. There are ghost beneficiaries but transparency measures causing confusion on the ground, he says adding that such measures should not lead to suppression of demand. 
 
A host of factors like revival in urban economic activity, cracking down on ghost beneficiaries and rationing of funds by the Centre could have contributed to a fall in MGNREGA demand in April.