Written by Talent KAS

Related Topics: Government Policies & Interventions, MGNREGA


  • The Central Government is planning to inject more money into the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme by linking wages under the Act to an updated inflation index, which will be revised annually.
  • The increased wages based on updated inflation indices may result in 10% higher government expenditure on the scheme.

Average wage of an MGNREGA worker

  • MGNREGA workers get paid much lower than market rates.
  • The national average wage of an MGNREGA worker is ₹178.44 per day, less than half of the ₹375 per day minimum wage recommended by a Labour Ministry panel.
  • According to the latest Periodic Labour Force Survey, market wages for men were higher than MGNREGA wages by 74% in 2017-18, while for women, it was a 21% gap.

Update of Indices

  • In the first week of September 2019, the Ministry of Statistics and Programme Implementation and the Labour Bureau informed the Rural Development Ministry that they had begun work to update the Consumer Price Indices for Rural areas (CPI-R) and Agricultural Labourers (CPI-AL) respectively.
  • This has been a long-pending demand and is one of the demand-side interventions that the government is carrying out in light of the current scenario in the rural economy.
  • The consumption basket of CPI-AL [which determines MGNREGA wage revisions] has not been updated for more than three decades, and rural consumption patterns have changed drastically in that time.
  • Food items make up more than two-thirds of the CPI-AL consumption basket.
  • But rural workers today spend a much smaller percentage of their money on subsidised food, and an increasingly larger amount on health, education and transport costs.

Why Government is showing urgency in wage revision?

  • The Centre is planning to notify updated MGNREGA wages in the current fiscal year itself rather than wait for the onset of 2020-2021.
  • This sense of urgency suggests the government views giving a fillip to the rural economy as a critical tool to combat the headwinds of the slowing economy.
  • The slowdown narrative and the Centre’s measures to address it so far have been dominated by urban India’s consumption crimp and easing of the corporate tax structure.
  • But the distress in villages where incomes are more vulnerable is more disconcerting.
  • The Reserve Bank of India, in its annual report, has pointed to weakening rural demand since the third quarter of 2018-19 as a serious concern and termed reviving consumption as its top policy priority.

Shortage of Funds

  • Even with existing wages, the scheme is running out of funds due to increased demand for work.
  • MGNREGA received a budgetary allocation of ₹60,000 crore, of which more than 75% has already been released by the Centre even before the halfway point of the year.
  • Droughts and floods in several States have led to an increased demand for work in the early part of the year, and the economic slowdown could spur demand again once the rabi planting season is over.

[Source: The Hindu]


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