MGNREGA seeks ₹25,000 crore additional funding

The Centre has sought ₹25,000 crore as additional funding for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme as part of the supplementary demand for grants submitted to Parliament on Friday, after the demand-driven rural jobs scheme ran out of funds midway through the year.

Overall, ₹3.73 lakh crore of additional funding is planned for the current financial year, with an equity infusion into Air India Assets Holding Company, additional fertiliser subsidy, food storage and warehousing, and payment of pending export incentives being the big ticket items accounting for three-fourths of the total.

The additional budget for MGNREGA was among the most keenly awaited, as pending payments for wages and materials have threatened to cripple implementation of the scheme. Continuing economic distress in rural India has led to increased demand for jobs under the scheme, which promises 100 days of unskilled work for every household at a pay of about ₹210 per day.

With four months remaining in the financial year, MGNREGA has finished spending the ₹73,000 crore initially allocated in the budget, and its financial statement now shows a negative net balance of ₹10,244 crore, including payments due.


Last year, with the COVID-19 pandemic forcing lockdowns and widespread unemployment, MGNREGA, with a revised budget of ₹1.1 lakh crore, acted as a lifeline for the rural economy. This year, the Centre seeks to transfer ₹25,000 crore to the National Employment Guarantee Fund, and the supplementary demand for grants entails an additional cash out-go of almost ₹22,039 crore for the scheme.

“It’s still hugely deficient. This is clearly another pandemic-affected year. Given the current demand, it’s clear you would have needed about ₹50,000 crore to deal with it, so this is only half of that,” said Mazdoor Kisan Shakti Sangathan founder Nikhil Dey.

“Even this amount, it is not clear when the releases will be made and when they will reach the people, who are waiting for their wages well beyond the due date. The money coming in driblets continues to starve the programme so it cannot be implemented as the law requires,” he added.

The single biggest expenditure in the supplementary budget is the ₹62,057 crore sought for an equity infusion into the company that holds the residual assets and liabilities of Air India after its privatisation, for re-payment of past government guaranteed borrowing and the past dues and liabilities of the carrier.

The additional fertiliser subsidy includes ₹43,430 crore for the phosphatic and potassic subsidy and ₹15,000 crore towards the urea subsidy scheme. The Food Ministry has also sought an additional ₹49,805 crore for food storage and warehousing schemes. ₹53,123 crore will go towards payment of pending export incentives.

“At end-October 2021, 52% of the full year expenditure target had been completed, and a portion of the higher than expected net cash outgo of ₹3 trillion in the second supplementary demand for grants will need to be absorbed through savings in other demands, to curtail the impact on the fiscal deficit. Nonetheless, there is near certainty that the fiscal deficit will exceed the budgeted ₹15.1 trillion, despite our assessment that net tax revenues and RBI surplus transfer will together surpass the BE by ₹1.7 trillion,” said ICRA chief economist Aditi Nayar.

“As hopes of a substantial portion of the ambitious FY2022 disinvestment target being realised fade, and we move closer to eventual rate hikes from the MPC, G-sec yields are likely to witness an inevitable hardening,” she added.

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