What could be the govt’s calculations behind the slashing of the MGNREGA budget

Source: The post is based on the articles “What could be the govt’s calculations behind the slashing of the MGNREGA budget” and “Budget 2023 is betting on recovery” published in Indian Express on 6th February 2023.

What is the News?

The Central Government has slashed the budget for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme to Rs 60,000 crore in 2023-24. This is the lowest since 2017-18.

Background

Over the last three years, India’s economy suffered massive disruptions 1) initially from the Covid-induced lockdowns and then 2) war in Ukraine that gave a shock to global commodity markets comparable to the oil and food price hikes of the 1970s and 2008-09.

The Government of India deployed two major social safety measures against these disruptions: The first was the public distribution system and the second was MGNREGA which generated an all-time-high 389 crore person-days of employment in 2020-21 and 363 crores in 2021-22. 

What is the rationale behind the reduction in funds for MGNREGA?

-According to the government, the Indian economy has fully emerged from the ravages of Covid and even adjusted to the disruptions of the Russia-Ukraine war. For instance, the opening chapter of this year’s economic survey is also titled “Recovery Complete”.

-The normalisation of economic activity means no need for special safety nets that helped protect the most vulnerable households from significant loss of income during the pandemic and after.

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What does the Economic Survey say about the MGNREGA Scheme?

The Economic Survey 2022-23 said that there has been a Year-on-Year (YoY) decline in monthly demand for MGNREGS.

The reason behind this is that the rural economy is normalizing due to strong agricultural growth and a swift bounce-back from the Covid-19 pandemic.

Moreover, the assets created under MGNREGA have had a positive impact on agricultural productivity, production-related expenditure and income per household along with a negative association with migration and a fall in indebtedness, especially from non-institutional sources.

What are the concerns associated with the reduction in funds for MGNREGA?

However, the government did not have planned for a) a worsening of the war in Ukraine, b) a repeat of last year’s March temperature surge that decimated the rabi crop and a normal southwest monsoon.