MGNREGA Wages vs Inflation
Context:
The Parliamentary Standing Committee on Rural Development and Panchayati Raj has criticised the central government for its inability to ensure that daily wages under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) keep pace with inflation.
More on News
- This critique comes amid growing concerns about wage stagnation, regional disparities, and declining demand for work under the scheme.
Mismatch Between Wages and Inflation
- An analysis of MGNREGA wages reveals a persistent lag between wage growth and inflation rates, particularly general and food inflation.
- Over recent years, MGNREGA wage growth has trailed inflation consistently, with the exceptions of FY21 and FY24, when wage increments matched or surpassed inflationary trends.
- This gap has compounded economic challenges for rural workers dependent on the scheme.
About MGNREGA
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is a significant legislative measure in India, aimed at enhancing livelihood security in rural areas. Enacted on September 5, 2005, and implemented from February 2, 2006, the act guarantees at least 100 days of wage employment in a financial year to every rural household whose adult members volunteer to undertake unskilled manual work. The program focuses on creating durable assets such as roads, canals, ponds, and wells, which contribute to rural infrastructure and development.
MGNREGA is primarily implemented by Gram Panchayats, which are local self-governments in villages. The involvement of contractors is prohibited to ensure that the benefits directly reach the workers. Workers are entitled to minimum wages, which must be paid within a specified timeframe. If employment is not provided within 15 days of application, an unemployment allowance is granted. Employment opportunities are provided within a 5 km radius of the applicant’s residence, promoting local employment.
Regional Disparities in Wage Growth
- The committee also flagged significant disparities in MGNREGA wage growth across states.
- Between FY23 and FY24, Goa registered the highest wage growth, while Uttarakhand recorded the lowest.
- These variations underline the uneven implementation of the scheme and the need for a more standardised approach to wage adjustments.
Declining Demand for Work
- Despite being demand-driven, the overall demand for MGNREGA work has declined noticeably since the pandemic.
- This decline aligns with a reduction in registered job cards, with the removal of job cards outpacing new issuances since FY23.
- The decreasing number of job cards could reflect tightening eligibility criteria or reduced rural awareness about the scheme’s provisions.
Budgetary Constraints and Expenditure
- MGNREGA expenditure has consistently exceeded budgetary allocations since FY20, highlighting the scheme’s demand-driven nature.
- Between FY20 and FY24, six states accounted for over half of the funds released by the Centre.
- This concentration of funding reflects the varying levels of reliance on MGNREGA across the country, with certain states requiring greater financial support.
Addressing Systemic Issues
- The challenges facing MGNREGA—including wage stagnation, regional wage disparities, declining work demand, and budget shortfalls—underscore the need for policy recalibration.
- Ensuring wages are adjusted to keep pace with inflation, standardising wage rates across states, and improving access to job cards are critical steps toward revitalising the scheme.
- Additionally, aligning budgetary provisions with actual expenditure requirements will ensure sustainable operations.
By addressing these systemic issues, MGNREGA can continue to fulfill its mandate of providing livelihood security and boosting rural development.
