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MNREGA comes to the rescue of the Rural Employment in 2020-21

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Initial estimates indicate that India’s GDP might contract by about 8% in 2020-21. This contraction is on account of the impact on many sectors of the economy. Data indicates that the MNREGA has come to the rescue of the rural employment in 2020-21 when the number of person-days of employment generated increased by almost 50%. Here is a detailed analysis.

In the ‘Study of State Budgets Report – 2020’, the Reserve Bank of India (RBI) observed that lack of employment opportunities during lockdown has resulted in an increase in the work demanded under Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) during May-June’2020, compared to the same period in previous years. The RBI focused on the COVID-19 pandemic and its impact in this report.

The increased demand under MNREGA & budgetary allocation indicated the government’s reliance on this scheme to provide rural employment in the face of unemployment as a result of the pandemic induced lockdown. Meanwhile, in the latest Budget 2021-22, the government reduced allocation under MNREGA for 2021-22 to Rs.73 thousand crores, down from the revised estimate of Rs. 1.11 lakh crores in 2020-21.

As per the initial budget estimates (BE), the allocation for MGNREGA was Rs. 61.5 thousand crores when the budget for 2020-21 was presented. The increase in the revised estimates (RE) compared to 2020-21 BE indicates that the government spent nearly twice the initial allocation for MGNREGA. 

In this context, we take a look at the numbers relating to MGNREGA during the current financial year 2020-21 and analyse the trends in comparison to the previous years to understand how the MNREGA came to the rescue of the government to provide increased rural employment in the face of the pandemic induced lockdown. For this analysis, we have relied on the data provided on the MGNREGA portal. 

Exponential increase in the Person Days generated under MGNREGA during 2020-21

As per the data provided on the MGNREGA portal, a total of 323.19 crore person-days of work was generated during the 10-month period of April-January of 2020-21. During the same period in 2019-20, the person-days generated was only 220.26 crores. In other words, the number of person-days generated in the first 10 months of 2020-21 is 46% more than person-days generated during the same period in 2019-20. In fact, in 2019-20, the number of person-days of work generated during this period was marginally less than that of even 2018-19 bucking the trend of marginal year-on-year (YoY) increase during the 2016-19 period.

The exponential increase in MGNREGA during 2020-21 can be correlated to the COVID-19 situation in the country where there was a large-scale reverse migration to the rural parts of the country from cities & towns. 

Meanwhile, the number of Households registered under MGNREGA averaged around 2.25 crores per month during April-January of 2020-21. During the same period, the monthly average of households covered in 2019-20 was around 1.52 crores.  The number of households registered and the person-days generated has varied throughout the year. 

Person Days of employment highest in every month of 2020-21 from May to December 

The RBI report mentioned earlier highlights that the person-days of employment under MGNREGA during May-June’2020 was higher compared to the same months in the previous years. 

Analysis of the data from earlier years indicates that the employment under MGNREGA is usually higher during the period of May & June when agricultural works are not generally available. However, in 2020-21, the employment under MGNREGA has been much higher even in other months compared to the previous four years.

In May 2020, the number of person-days of employment under MGNREGA across India was 56.93 crores compared to 36.94 crores the previous year. Similarly, the total number of person-days of employment during June 2020 was 64.06 crores, nearly double of 32.13 crores the previous year. 

In line with the cyclical trends in a year, the employment under MGNREGA dropped down in the ensuing months when compared to May-June, but still, the monthly figures during 2020-21 were higher than the numbers of the respective months in the earlier years. The variance compared to previous years has also been higher, with person-days generated in a few months is more than double that of last year. 

This trend was bucked in January 2021, when the number of person-days generated was only 18.23 crores compared to 23.11 crores the previous year. The only other month, where the numbers for 2020-21 were lesser than previous years, was April 2020 i.e., the first full month of lockdown. The reduction in person-days of employment generated in January 2021 could be because of the exhaustion of available funds by most states. 

Households gaining employment under MGNREGA reached record highs in 2020-21

The increase in the number of person-days of employment generated during 2020-21 can be attributed to the corresponding increase in the number of households that have sought and gained work under MGNREGA during the year. 

We have highlighted earlier that on average, MGNREGA covered 2.25 crore households per month during the 10 months of 2020-21 i.e., April-January. This is higher than the 1.52 crores monthly average in 2019-20. 

A Month-on-Month comparison with the previous years also indicates that since May 2020, the number of households covered under MGNREGA is higher in the current financial year compared to the respective months in the previous financial year. The proportional increase in each of the months is on par with what is observed in the number of person-days of employment, indicating a correlation with the person-days generated and the number of households that have gained employment.  This also indicates that there has not been a significant increase in the number of days the work available per household compared to previous years. We would explore this later. 

West Bengal, UP, MP, Bihar & Odisha among the states with a great increase in MNREGA employment in 2020-21

During April-January of 2020-21, a total of 39.97 crore person-days of work was provided under MGNREGA in West Bengal. This is the highest in the country during this period. When compared to the same period last year, the number of person-days of employment has more than doubled in the State. It is also the state which registered the greatest increase in person-days of employment.  

The trend of increase in person-days of employment during 2020-21 compared to 2019-20 is seen across all the States/UTs, albeit at varying levels. 

Among the other states that have registered a significant increase in MGNREGA employment during 2020-21 compared to 2019-20 are Uttar Pradesh, Madhya Pradesh, Bihar, Odisha & Jharkhand. 

Rajasthan, Tamil Nadu, Andhra Pradesh, Telangana & Chhattisgarh which are among the states that registered a higher number of person-days of employment in the previous year reported only a marginal increase in 2020-21.

The dependence on MGNREGA during 2020-21 has doubled in the case of Haryana although the number of person-days of employment is lesser. The same can also be said about Uttarakhand. 

The higher increase in WB, UP, MP, Bihar, Odisha & Jharkhand points to the case of a large section of the population in these states who lost employment and hence were dependent on MGNREGA for employment. In an earlier story that reviewed RBI’s assessment of COVID-19 impact on States, these states were among the ones where the highest migration for work happens. In other words, the high demand for MNREGA in these states is largely driven by the reverse migration to these states during & after the lockdown. 

This data further conforms with the data relating to the number of households that were provided work under MGNREGA. States including WB, UP, MP, Odisha, Uttarakhand, Haryana, Manipur are among those that registered a relatively higher increase in the number of households receiving employment under MGNREGA during April-January of 2020-21 compared to the same period in 2019-20. 

The increased dependence on MGNREGA in 2020-21 may not sustain in 2021-22

As highlighted earlier, the estimated budget allocation for MGNREGA in 2021-22 is Rs. 73 thousand crores, despite the fact that the government had to nearly double the allocation in 2020-21 compared to the budget estimates. This could mean that the government anticipates a return to normalcy in employment levels and that the dependence on MGNREGA would reduce. 

The fewer number of person-days in January 2021 compared to last year could be an early indication of an ebb in employment under MGNREGA.  However, it has to be noted that the number of households covered during January 2021 is still higher than last year. The trend for the remaining two months of the year i.e., Feb-March could provide a better understanding of the trend regarding the dependence on MGNREGA for employment.  This would largely depend upon the opening up of the economy and the availability of employment opportunities as in the pre-lockdown days. 

The dependence on MGNREGA is also not a viable option. While the 100 days of guaranteed employment in a year in itself is not adequate as a sustainable year-long livelihood, the fact that in most of the states, the actual work available is much lesser than the 100 days makes it all the more difficult. The exponential increase in the number of person-days in 2020-21 is due to an increase in the number of households requiring work and does not necessarily translate to an increase in the number of days available per household. 

Nevertheless, in view of the current economic situation, it would be advisable for the Government to continue increased support under MGNREGA and create opportunities for more workdays at the household level till the situation improves. 

Featured Image: MNREGA Impact on Rural Employment in 2020-21

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