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Rural employment spending by the Center pushes work into progress

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In 2020-21, the central government plans to spend far more money than ever on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and has increased the allocation for ₹40 000 crores to over ₹1 trillion. Analysis of the components, if that’s enough.

Why do you need so much money for MGNREGS?

The government plans to spend ₹1.01.500 crores (see Chart 1) from this financial budget under the MGNREGS. In times of economic crisis, governments go back to what British economist John Maynard Keynes proposed: In times of economic difficulties, when the private sector and individuals do not spend money, the government must become the last resort to put money in the hands of the people. The ratio between the total amount to be spent on MGNREGS and GDP is 0.45 percent (see Chart 2). Even after adjusting to the growth of the Indian economy over the years, the cost of MGNREGS will be highest in 2014-15.

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How will these expenses help people?

The National Council for Applied Economic Research (NCAER) predicts that the Indian economy will shrink by 12.5% in 2020-21, while industry and services are expected to shrink by 27.1% and 8.1% respectively. As a result, many people may lose their jobs, and many have already lost their jobs, especially in the informal sector. This explains to a large extent the speed with which migrant workers return to their country of origin. The government, together with others, must create work for them. Finance Minister Nirmala Seetharaman recently stated that states have been encouraged to employ migrant workers under the programme.

What is the aim of the programme to create jobs in rural areas?

The NSAER forecasts growth of 2.3% in the agricultural sector this year. But even this rate of growth will not be sufficient for returning migrant workers, as the agricultural sector already employs more people than is economically justified. For example, the government’s rural employment programme aims to create jobs for migrants.

Will the increase in costs be sufficient?

At 18. In May, 23.3 million households were looking for work under the programme, compared to 25.1 million in May 2019. As the government recently indicated in its answer to Lok Sabha’s question, MGNREGS is an option to reduce the livelihoods of rural households if there are no better employment opportunities. Households have started to take advantage of this opportunity and as more and more migrant workers return home, the demand for the programme will only increase.

Is there anything else the government can do?

Over the years, the government has been able to provide about 50 days of work per family. For the years 2018-19 and 2019-20 it was 50.9 and 48.4 days respectively. In states such as Bihar and Uttar Pradesh – where large numbers of migrant workers live – the numbers were significantly lower, at 41.3 and 44.8 days respectively. More jobs must be created in these countries, and if that means spending more money, the Centre must be prepared.

Vivek Kaul is an economist from Mumbai.

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