Only 69% of the persons who were ‘offered’ work under the rural employment guarantee scheme (MGNREGS) turned up for it till June 1 in the current financial year against around 85% in the last two years, reflecting a rapid spread of Covid-19 in rural areas and probably a hesitancy on the part of the people to be exposed to the virus.
Unlike in April 2020, which saw complete nationwide lockdown and a decline in demand for MGNREGS work, the demand for work under the scheme that provides subsistence wages, remained high in May 2021, which also witnessed a near pan-India lockdown.
While 4.41 crore persons demanded work in May against 3.59 crore in March, only 22.9 crore person days were created in May compared to 25.6 crore in March. Curiously, even as the demand for work is high, people are unable to grab the work offered. Or there could be a ‘communication gap’ between the officers at the block/gram panchayat level and the workers, so that “work offers” are much less than reported officially.
The government was quite liberal with disbursal of MG-NREGS funds in the weeks that followed last year’s lockdown – person days shot up to 57 crore and 64 crore, respectively, in May and June last year from an average of 22.1 crore/month in 2019-20. Though the rate declined since, a higher level of MGNREGS work was maintained throughout 2020-21, resulting in the spike in the budget outlay for the scheme to Rs 1.11 lakh crore from Rs 61,500 crore originally estimated. However, this time around, the government seems to be more economical with the spend on the scheme – at least there isn’t evidence of a loosening of the purse strings by it as yet.
The Budget outlay for the scheme in 2021-22 is Rs 73,000 crore.
In a recent report, Nomura has noted that nominal rural wages have been pushed much higher during the pandemic – in 2020-21, rural wage buildup in the agricultural sector increased by 7.2 pp after rising 3.8 pp in FY20, while rural non-agricultural wages rose by 5.4 pp compared to a 3.9 pp buildup in FY20. Attributing the faster buildup in rural wages largely to supply-side factors, the agency added that while higher rural wages are usually positive for rural demand, it was unlikely the case in the instance reported. “Higher rural agricultural wages, alongside rising costs of other inputs like fodder, diesel and fertilisers, could lead to higher farm production costs, thereby resulting in cost-push inflationary pressures,” it noted.