Downgrading of NREGA allocations will hurt job creation in the second half of the year, experts say

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NEW DELHI: As the Union budget has reduced the MGNREGA funds from around Rs.1 crore spent in 2021 to Rs.73,000 for 2022-23 at the level of the original allocation for 2021-22, supporters of the program say and the volunteers working on the ground, it will hurt job creation in the second half of the year when the financial crisis becomes evident with no immediate relief in sight as has been the case in the past.
The argument that the system is demand driven and that the government has a legal obligation to fund the demand that arises is considered insufficient in terms of how the liquidity crunch is affecting the scheme.
Debmalya Nandy of NREGA Sangharsh Morcha said: “Through strict rationing of funds, it became a supply-side programme. Every year around 80-90% of the budget is used up within the first 6 months, resulting in a severe slowdown in on-site work.”
The crux of the argument is that when the budget is exhausted and payments are delayed, a message trickles down to the lower echelons of the bureaucracy that job creation must be slowed down to avoid massive arrears and chaos.
Workers who are not immediately paid and who are informally turned away are also reluctant to seek work at NREGA sites. It harms the poor financially.
As the Covid pandemic devastated the economy, the surge in demand for labor led to massive spending of Rs 1.11 crore in 2020-21. As the economy faltered again with the start of the second wave in 2021-22, labor demand under the program surged again. The reduced allocation of Rs 73,000 crore, which had drawn criticism, was exhausted in mid-2021, sparking an uproar over unpaid wages and arrears. The government first insured and then released more money. Since then, work has picked up again and demand remains above pre-pandemic levels, a trend also noted by the Economic Survey.
Even in relation to the Rs.73,000 allocation, some are pointing out that the Government has outstanding debts of Rs.18,350 and thus only Rs.54,650 will be available for 2022-23.
In the 16 years of the program’s implementation, the most striking fact has been the continued appeal of an emergency labor program, initially disputed by economists, along with a recognition that the state has the resources to meet its costs. Crises such as the Covid pandemic and recurring droughts have also proven their effectiveness as a safety net for the unemployed rural poor.
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