Economic Survey: MGNREGS work demand not directly correlated to rural distress

New Delhi, Jul 22 (PTI) MGNREGS work demand does not directly correlate with increased rural distress at a micro-level and data from Financial Year 2024 shows states like Kerala and Tamil Nadu, with relatively lesser poor population, use more funds under the flagship rural employment scheme, according to the Economic Survey.

The survey found there is a marked variation in the performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) across states.

Multiple research studies have been conducted to find a definite cause for such unevenness in outcomes but a satisfactory explanation has not been found, said the survey which was presented in Parliament on Monday. It said while some reports suggest that MGNREGS demand is indicative of rural distress, insights from MGNREGS Data for FY-24 shows that although Tamil Nadu has less than one per cent of the country's poor population, it accounted for nearly 15 per cent of all MGNREGS funds released.

Similarly, Kerala, with only 0.1 per cent of the poor population, used almost 4 per cent of the MGNREGS funds, the survey report showed.

Together, these states generated 51 crore person-days of employment.

In contrast, Bihar and Uttar Pradesh, with about 45 per cent (20 percent and 25 percent respectively) of the poor population, accounted for only 17 per cent (six percent and 11 percent respectively) of MGNREGA funds and generated 53 crore person-days of employment. It said the correlation coefficient between state-wise multidimensional poverty index and person-days generated is calculated to be only 0.3, indicating that MGNREGS fund usage and employment generation are not proportional to poverty levels.

Calculations also reveal that there is little correlation between MGNREGS fund usage and rural unemployment rates. According to the Data from FY-23, states with the highest rural unemployment rates did not necessarily use the most MGNREGS funds. "Contrary to the popular narrative, the data does not support the idea that states with high rural unemployment rates in FY22 sought more MGNREGS funds in FY23," the survey said. The scheme data also revealed that minimum wage fixation is ad-hoc and not correlated with per-capita income or poverty headcount ratio. "States such as Haryana, Kerala, Tamil Nadu, Karnataka, and others have relatively high notified wage rates in MGNREGA, relative to their per capita incomes. This significantly impacts state-wise MGNREGS fund usage, as the wage component is fully borne by the Central Government," the report said.

"MGNREGS work demand does not directly correlate with increased rural distress at a micro level," it said.

The survey also said a state's institutional capacity is crucial for effectively tapping MGNREGS funds and state governments must finalise labour budgets for the upcoming financial year in advance, following a bottom-up planning process.

It flagged differences in registering demand, and said despite provisions mandating State governments to grant unemployment allowance if work is not provided within 15 days, only Rs 90,000 was released in FY 24 and Rs 7.8 lakh in FY23 across all states.

It said evaluation reports indicate that employment was often unavailable when sought, which suggests that block-level functionaries may not register demand in real time.

"Consequently, formal data showing MGNREGS work demand may not reflect the true demand and current rural economic distress. This also indicates that work demanded is only reported on the portal when employment is actually provided (presumably to save on the State Government's liability towards unemployment allowance)," the survey said.

"If this is indeed the case then data trends should show that states with more poverty and higher unemployment rates use more scheme funds and generate more employment person-days. Additionally, there might be a correlation between MGNREGS fund usage and reduced unemployment. MGNREGS wages could reflect state poverty levels," the survey said.

It said insights from MGNREGS Data for FY-24 shows that although Tamil Nadu has less than one per cent of the country's poor population, it accounted for nearly 15 per cent of all MGNREGS funds released.

Hence work demanded on the portal is de-facto equivalent to work provided and not the "real" demand, the economic survey said.

The report further said variations in MGNREGS fund usage arise from irregularities and leakages observed across states, and despite lacking exhaustive documentation, news reports, social audits and anecdotal evidence suggest that funds often do not reach intended beneficiaries, making demand an unreliable distress indicator.

Instances of workers paying contractors and giving up job cards, illegal use of machines instead of labour, unrealistic labour budgets, delays in fund release, lack of job card updates and unverified bills have been reported from different regions, it said. The Social Accountability Forum's audit reported Rs 658 crore misappropriated over 2018-20, with grievances focusing on wage issues, job cards, and worksites. It also noted that transparency, accountability, and record-keeping processes were often violated in MGNREGA implementation, the survey added. PTI