MGNREGS work demand falls in first half of FY25 amid rural recovery, favourable monsoons

New Delhi: Demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) slowed in the first half of the current fiscal year, official data showed, possibly reflecting slower government spending followed by rain-driven rural recovery.

According to the rural development ministry, the total number of households demanding work under MGNREGS in September fell to 16 million, from 18.5 million a year ago.

In fact, the number of households demanding work under the scheme – mean for the poorest families – declined every month between April and August during the ongoing fiscal compared to the year-ago period, but for varying reasons.

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Work demand fell to 21.5 million households in April, compared with 24 million a year ago; to 27.2 million in May, against 31.7 million a year ago; and 26.4 million in June compared with 33.7 million a year ago.

In July FY25 this figure stood at 19 million (down from 23.5 million) and in August FY25, it was 16 million (19 million in FY24).

Two key factors

Experts said the drop in job demand under MGNREGS scheme can be attributed to two main factors.

The first is a slowdown in the government spending during Q1, FY25 (April-June quarter) due to the general elections, which led to a temporary halting of state-backed activities that converge with the employment scheme, like construction of houses in the rural areas.

The second is the favourable monsoon conditions, which have resulted in increased farm activities, making agriculture lucrative for many rural dwellers.

"The holding of government expenditure especially at the state level during the Q1, FY25 period, due to general elections, resulted in lower demand for work under the MGNREGS. This also impacted other state-backed schemes with strong convergence with the MGNREGS like the rural housing project," said Bhanumurthy N.R, director of the Madras School of Economics.

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“The drop in demand for work under the scheme during the July-September period can be attributed to the recovery in the rural economy, and increased farm activities."

The secretary of the ministry of rural development didn't respond to an emailed query.

Meanwhile, the average days of employment provided per household under the scheme has dropped to 35.24 days in FY25 (as of 13 October) compared with 52.08 in the previous fiscal year.

Guaranteed employment

MGNREGS provides the poorest households in rural India with a minimum of 100 days of guaranteed waged employment in a financial year.

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

On 23 September Mint reported that the scheme is unlikely to see a higher allocation in FY25, with the government hoping for an improvement in the rural economy on the back of better rains.

According to the latest government data, overall private consumption growth during Q1, FY25 surged to a two-year high of 7.4%, up from 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.

Revised FY24 estimates for MGNREGS stood at ₹86,000 crore, but actual spending touched ₹1.06 trillion, prompting the government seeking an extra ₹14,524 crore through supplementary demand for grants.

"The allocations under the MGNREGS are usually increased when the rural economy is distressed. With a recovery in the rural economy, this is not the case anymore," a senior finance ministry official said earlier.