Laying the groundwork for revisiting the Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGS) as a poverty alleviation tool, Chief Economic Adviser V. Anantha Nageswaran on July 22 noted in the Economic Survey that demand under the scheme was not a “real indicator” of rural distress. 

While there is a marked variation in the performance of the scheme across States, Mr. Nageswaran said that none of the studies conducted so far had come up with a satisfactory explanation on the unevenness in outcomes.

Also read: Economic Survey 2023-24 highlights

According to the survey, while Tamil Nadu has less than 1% of the poor population in the country, it accounted for nearly 15% of all the MGNREGS funds released in the financial year 2023-24.

Similarly, Kerala, with only 0.1% of the poor population, used almost 4% of the total funds allocated for the MGNREGS. Together, they generated 51 crore person-days of employment.

In contrast, Bihar and Uttar Pradesh, with about 45% (20% and 25%, respectively) of the poor population, accounted for only 17% (6% and 11% respectively) of the MGNREGS funds and generated 53 crore person-days of employment.

As per the survey, the correlation coefficient between State-wise multidimensional poverty index and person-days generated was only 0.3, indicating that the MGNREGS fund usage and employment generation were not proportional to poverty levels. (A coefficient of 1 would indicate that the poorer a State, greater the number of person-days it would generate, while a coefficient of 0 would indicate no relationship between poverty and person-days.) 

In this context, the survey concludes that “demand under MGNREGS is not a real indicator of rural distress but is rather predominantly linked with the State’s institutional capacity and to some extent also different minimum wages and other considerations”. 

At the same time, it concedes that the variation in fund usage can be attributed to the varying MGNREGS wage rates in each State. There is no national minimum wage under the programme and the States are free to decide their own wage rates. States such as Haryana, Kerala, Tamil Nadu, and Karnataka have relatively high notified wage rates under the MGNREGS.

The difference in registering the demand for the scheme is heavily dependent on the efficiency of State administration. This is reflected in the fact that despite provisions mandating State governments to grant unemployment allowance if work is not provided within 15 days, only ₹90,000 was released in FY24 and ₹7.8 lakh in FY23 across all States.