Runup to Interim Budget 2024: The minimum NREGA budget for FY 2024-25 must be Rs 2.71 lakh crore

With the interim budget session approaching, the Bharatiya Janata Party-led National Democratic Alliance is expected to announce increased allocations for the social sector, keeping the 2024 general elections in mind. The National Rural Employment Guarantee Act (NREGA), which provides 100 days of employment to every registered rural household on demand, is one of the most important programmes that supports a significant portion of the rural population (currently 250 million registered workers). NREGA was a crucial lifeline for lakhs of rural citizens during the COVID-19 pandemic, as migrants returned home and the economy saw a shutdown.

The NREGA budget has historically been inadequate. Six-eight months into the Financial Year (FY) much of the initial allocation runs out, leading to reduced employment generation and long delays in wage payments in the latter half of the FY. Even during the pandemic when the NREGA budget hit a record high, studies showed there was still significant unmet demand for work. The budget has been cut down in the past two FYs, even below pre-pandemic levels. In the current FY, the initial allocation was only Rs 60,000 crore, the lowest allocation in over six years. The Union Ministry of Rural Development (MoRD) has justified this by arguing that the economy has revived enough to ensure rural workers no longer need the programme. However, data shows work demand has remained higher than expected this FY, as echoed in this news report. As the consequences of climate change multiply, for instance the late monsoons this year, the need for a strong safety net like NREGA will only go up. Additionally, rural wages have stagnated over the past decade to a concerning extent. In such a context, a robust, well-funded NREGA will reduce rural distress, protecting livelihoods and further promoting rural consumption.

We will examine NREGA budgets over time during the course of this article. We will also extrapolate the unpaid dues for the current FY, and advocate for a minimum NREGA budget of Rs 2.7 lakh crore for FY 2024-25.

Past Trends

Despite persistent recommendations by civil society actors, the NREGA budget allocated for FY 2023-24 is 18 per cent lower than the budget estimate (BE) for FY 2022-23. The revised estimate (RE) for FY 2023-24 currently stands at Rs 74,524 crore, 17 per cent lower than previous year’s RE of Rs 89,400 crore. So far only around two per cent households employed have completed 100 days of work in the current FY and average days of employment remain below 50 — lowest in the past five years. This note recommends that a conservative estimate of one per cent of gross domestic product (GDP) is required to provide legally guaranteed 100 days of work for at least all those who worked in the current FY. On the contrary, the allocation for FY 2023-24 as a percentage of the GDP is around 0.25 per cent which is the lowest ever in the history of NREGA, as shown in figure 1.

In fact if one considers the allocation in real terms, adjusted for inflation, the budget falls further. Current year RE adjusted for inflation stands at Rs 70,532 crore, which is 21 per cent lower than the RE for FY 2022-23. See Table 1 for inflation-adjusted RE for the past five years.

NREGA Budget for the coming Financial Year

Dues

The current FY saw more than 90 per cent of the initial budget allocation drying up by October 2023. Consequently, the MoRD sought additional funds for NREGA. An extra Rs 14,526 crore was approved in December 2023, but even this has been overshot by January 2024. With two months still remaining in the FY, employment demand and generation, alongwith timely payment of wages, are likely to suffer unless a substantial additional allocation is made immediately. On average, over the past five years, 20 per cent of the budget has gone into clearing the arrears of previous years (Figure 2). The unpaid dues this year are already at Rs 11,051 crore, when 108 pert cent of the funds available have already been utilised. Assuming the employment trend so far in this FY continues, we estimate that the next FY will begin with pending arrears of nearly Rs 32,000 crore.

Minimum Budget for FY 2024-25

For calculating the minimum required budget allocation for NREGA to function as intended, we use the minimum agricultural wage for each state, indexed by five per cent inflation for each successive year. This gives us a national weighted average minimum wage of Rs 329. Using this wage rate, we estimate the minimum budget for FY 2024-25 must be Rs 2.71 lakh crore, to provide legally guaranteed 100 days of work per household to at least the households that worked in the current FY. This is a conservative estimate that only considers the households that were employed this year. Our calculations can be found in this sheet.

Table 2 shows different scenarios of the number of days of work per household that will be possible corresponding to different budget allocations. Therefore, if the initial allocation is Rs 1.2 lakh crore, only 40 days of work can be generated for the 56 million active households.

Table 2: How much allocation will translate to how many days of work per household on average?

A stronger NREGA

Despite sustained demands from workers’ unions and civil society actors for a high budget in NREGA, the Union government has continued to underfund the programme. This has led to a NREGA where unmet demand is a constant, long delays in wage payments the norm, and the ‘discouraged worker’ effect commonplace. Beyond an insufficient budget, NREGA is also weakened by unnecessary,complicated technology like attendance apps and Aadhaar-payments. West Bengal has had zero funds budgeted for NREGA for two years now, while experiencing an unprecedented hike in worker deletions of 5,000 per cent. Meanwhile, the reduction of NREGA allocations is being compensated by an increase in the allocations of PMAY & Jal Jeevan Mission. No doubt that housing and water are essential, but they need not be funded by weakening NREGA in the name of convergence. In their current form of implementation, PMAY and Jal Jeevan Mission are vulnerable to contractor based exploitation and contractors are explicitly banned in NREGA. Convergence of these are meant to weaken the rights-based imperative of NREGA. The Act was a milestone in rights-based legislation, but abysmal initial allocations are slowly killing the programme. The government must recognise the significance of NREGA and ensure adequate budgets that allow the programme to function as intended.

Apurva Gupta is associated with NREGA Sangharsh Morcha. Laavanya Tamang is associated with People’s Action for Employment Guarantee. Both are also a part of LibTech India

Views expressed are the authors’ own and don’t necessarily reflect those of Down To Earth

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