MGNREGS unlikely to see higher allocations in FY25 with improvement in rural economy

New Delhi: The national rural job guarantee scheme that gives millions of the poorest Indians employment is unlikely to see a higher allocation in FY25, two people aware of the matter said, citing government hopes of an improvement in the rural economy this year on the back of better rains. 

Allocations for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) – considered a lifeline for the rural poor – are unlikely to be increased during FY25, the first person mentioned above said.

"The allocations will remain the same unless there are major problems with the rural economy, in terms of famine or other challenges. But … the rainfall this year has been better than the last year, and as a result, the rural economy is in a much stronger position," the person mentioned above said, requesting anonymity.

"The growth trend in the rural economy is expected to better its urban counterparts with favourable monsoon conditions and improved sowing data sustaining the upward trend in rural demand," the person added.

Overall private consumption growth during Q1, FY25 surged to a two-year high of 7.4% as against 4% in Q4, FY24 and 5.5% in the year-ago period. Separate figures for rural consumption are not available.

The Centre allocated ₹86,000 crore towards MGNREGS for FY25 in the annual budget presented in July.

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Initial estimates for MGNREGS stood at  ₹60,000 crore and  ₹86,000 crore for FY24 and FY25, respectively. However, spending overshot estimates in FY24, indicating high demand for rural jobs.

While the revised FY24 estimate for MGNREGS stood at  ₹86,000 crore, the actual spending touched  ₹1.06 trillion, according to data from the rural development ministry.

During FY24, the government's first supplementary demand for grants for MGNREGS sought an additional sum of ₹14,524 crore. These grants are typically sought when the original appropriations prove insufficient to meet ongoing expenses.

Additional funding

However, during FY25, the government is unlikely to seek additional funding under the supplementary demand for grants for MGNREGS, the second person mentioned above said.

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Interestingly, the annual budget 2023-24 (FY24) had allocated ₹60,000 crore for MGNREGS, sharply lower than the outlay of ₹89,400 crore for FY23.

During FY25, between 1 April and 23 September 2024, the average days of employment provided per household under MGNREGS stood at 33.93, compared to 52.08 days innall of FY24, according to data from the ministry of rural development. 

The total number of households employed under MGNREGS in the same period of FY25 stood at 44.3 million, compared with 60 million in all of FY24

As things stand, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) provides a minimum of 100 days of guaranteed wage employment in a financial year to the poorest households in rural India.

Days under the scheme usually increase when the overall rural economy is weak and people are out of work.

Experts said allocations towards MGNREGS are directly linked to the state of the rural economy, with demand for jobs under the scheme going up when the rural economy is not doing well.

"The demand for MGNREGS typically goes up when people in the rural areas are out of work or when they face crop failures. The MGNREGS also supports farmers between the two crop-sowing seasons," said Madan Sabnavis, chief economist at the Bank of Baroda.

"However, if you take FY24, there was a demand for jobs under the MGNREGS as the rural economy was weak. This year, so far, the demand for jobs under the MGNREGS has been lower since the rural economy is doing better as compared to last year," Sabnavis added. 

A spokesperson of the finance ministries didn't respond to emailed queries.