Rural jobs demand falls sharply as farm work picks up, spending curbs bite

By: Shantanu Bhattacharji

If funding stays tight, states may find it harder to ramp up job creation during rural distress, diluting the scheme’s role as a safety net and leaving households more exposed to income shocks from erratic rains or poor harvests.

Demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) fell sharply in August, as seasonal farm activity drew workers back to fields and tighter government funding slowed the rollout of projects. The number of households seeking employment under the country’s flagship rural jobs was 26 per cent lower than a year earlier, marking the second consecutive monthly decline. The fall followed a steep drop in July, when just 16.6 million households demanded work—the lowest in 10 months—compared with 27.6 million in June and 28 million in May, official data show. 

Monsoon Effect 

The biggest factor behind the slowdown was a surge in farm activity. August brought plentiful rainfall, especially in northwest India, which recorded its best August showers in more than two decades. That pushed up sowing of key kharif crops such as paddy and maize. By August 22, farmers had sown 107.4 million hectares of crops, about 3.5 million hectares more than last year. 

The shift highlights the counter-cyclical nature of MGNREGA. Workers typically turn to the scheme during lean agricultural periods, but demand falls once farms open up seasonal jobs. For rural households, agriculture remains the first choice of employment because it often pays better and is closer to home. 

Policy Constraints 

Yet the slowdown in demand cannot be explained by farm work alone. The Centre has asked states to restrict MGNREGA spending to 60 per cent of their annual allocation in the first half of the fiscal year. The move is aimed at managing cash flows and keeping the budget deficit under control. But it also limits how many worksites states can open, effectively capping the number of jobs available under the scheme. 

On top of that, heavy rains and localised flooding disrupted projects in parts of the country. In states such as Bihar and Assam, waterlogging and floods left little scope for rural construction or land development work that usually forms the bulk of MGNREGA activity. 

What Lies Ahead 

Analysts expect demand to stay subdued through September as sowing continues. The seasonal pattern suggests that activity could revive once farm operations wind down and rural workers look for supplementary income. Much will depend on whether the Centre loosens spending restrictions in the second half of the fiscal year. 

If funding remains tight, states may struggle to expand job creation when rural distress re-emerges, potentially weakening the scheme’s role as a safety net. That could leave households more vulnerable to income shocks, especially if crop yields are hurt by uneven rainfall distribution or a weak harvest later in the year. 

Bigger Picture 

MGNREGA, launched in 2006, guarantees 100 days of paid work per household annually and is considered one of the country’s most important social safety nets. The programme has repeatedly cushioned rural incomes during crises, including the Covid-19 lockdowns, when demand surged to record levels. 

This year’s contraction highlights both the strength and the limits of the scheme. On the one hand, it reflects the rural economy’s ability to absorb workers when agriculture is buoyant. On the other, tighter budget controls show how fiscal pressures can reduce the programme’s flexibility, just when it may be needed most. 

For the government, the challenge is balancing fiscal discipline with rural resilience. For millions of workers, the real test will come after the monsoon—when farm jobs shrink, and the demand for guaranteed work tends to rise again.