MGNREGA: Budgetary Allocations Vs Actual Expenditure

By: Nikita Gupta

In 2024-25, the budget allocation for the employment guarantee scheme is Rs 60,000 crores, significantly lower than the Rs 73,000 crores allocated in 2022-23. Interestingly, the budget presented recently reveals that the actual expenditure of MGRNEGS was Rs 89,400 crores.

For more than five years, finance minister Nirmala Sitharaman has attempted to reduce allocations for the flagship rural employment guarantee scheme called MGRNEGS. Yet, each year, the actual expenditure on the scheme has far exceeded the allocation. In simple terms, the finance ministry has been consistently underestimating the number of citizens living in villages who seek work under the scheme. For tens of millions of landless labourers, the scheme and the free food grains welfare scheme have been a lifeline since the Covid epidemic. This year, the budget allocation for the employment guarantee scheme is Rs 60,000 crores, significantly lower than the Rs 73,000 crores allocated in 2022-23. Interestingly, the budget presented recently reveals that the actual expenditure of MGRNEGS was Rs 89,400 crores. Given the current economic situation in rural India, it is almost certain that the actual expenditure will far exceed the allocated Rs 60,000 crore.  

MGNREGS, one of the largest work guarantee schemes in the world aims to promote the livelihood security of rural households across the country by providing a minimum of 100 days of guaranteed wage employment in a fiscal year to every adult member of a rural household who volunteers to get employed in unskilled manual work. It marks an important poverty alleviation programme that recognizes the resource base of the poor by reaching out to the most vulnerable sections of rural locations along with scheduled castes, scheduled tribes, women-headed households, and other marginalized sections following a rights-based framework.

A worker is paid a daily wage that ranges from Rs 220 to Rs 370 depending on the state, with states with higher per capita income paying more. For example, while the daily wage under the scheme is Rs 245 in Bihar, it is Rs 374 in Haryana. Economists specialising in poverty reckon that this scheme has played a significant role in lifting rural Indians out of poverty, especially those who have not derived benefits from high GDP growth rates. A couple choosing to work for 100 days under the scheme in Bihar would earn a total of Rs 49,000. But that’s income earned in just 100 days. Since most landless workers do find some work or other during sowing, harvesting and other allied activities in horticulture, the MGRNEGS acts as a critical boost to the low incomes of a rural couple. There is unanimity amongst economists that rural India escaped starvation in the immediate aftermath of the Covid lockdown and economic collapse because of this scheme and the free food grains scheme. 

Under the circumstances, it is a mystery why the finance ministry keeps trying every year to reduce expenditure under the scheme. The chart below indicates the allocation and expenditure trends for the scheme.