MGNREGS and the Need for Adequate Funding
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Red Book

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This post on MGNREGS and the Need for Adequate Funding has been created based on articleStifling demand” published in The Hindu on 30th January 2025.

UPSC Syllabus topic: GS Paper 3- Economic Development

Context: The article discusses the current challenges faced by the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), a flagship rural employment programme in India. It highlights how the scheme, despite being an essential social security measure, is facing funding constraints and wage delays, which in turn are stifling demand.

What is MGNREGS and why is it important?

  1. The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is a welfare program that provides rural employment and guarantees at least 100 days of wage employment in a financial year to rural households.
  2. It has been operational for nearly 20 years and has been recognized for its role in providing economic stability to rural workers.
  3. MGNREGS has continued under different regimes, proving its utility and popularity. However, while the National Democratic Alliance (NDA) government initially viewed it as an “unwanted necessity,” the COVID-19 pandemic highlighted its critical role in supporting rural workers and returning migrants.

How has the allocation for MGNREGS changed over the years?

  1. Budget allocations for MGNREGS have steadily declined. During the pandemic in FY21, it accounted for 3.2% of the Budget, but by FY25 (BE), it has dropped to 1.78%, despite its continued demand.
  2. Even though MGNREGS is a demand-driven scheme, no additional allocations have been made for the current financial year. This has resulted in wage delays and artificially suppressed demand.

What are the major implementation issues faced by MGNREGS?

The scheme faces multiple challenges, including:

  1. Wage adjustments: Wages have not been revised adequately to match inflation.
  2. Aadhaar-based payment issues: Linking job cards to Aadhaar has caused delays and exclusions.
  3. Funding cuts: Reduced allocations undermine the scheme’s demand-driven nature.

How has MGNREGS benefited rural communities?

MGNREGS has had several positive impacts:

  1. Income support: Helps rural workers, especially during agricultural off-seasons.
  2. Infrastructure development: Contributes to village assets like irrigation canals, rural roads, and water conservation projects.
  3. Boosts the rural economy: Increases disposable income among the poor, stimulating local economic activity.

Why should the government change its stance on MGNREGS?

  1. Given the persistent issue of rural poverty, MGNREGS remains crucial. The government should increase its budget allocation to ensure that demand-driven employment is met without delays.
  2. A substantial and demand-based allocation in the Union Budget is necessary to maintain the effectiveness of MGNREGS and support rural workers adequately.

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