Budget 2012 Hikes NREGA Outlay While Appearing To Slash

The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) is a 'flagship’ scheme of the United Progressive Alliance (UPA) Government. The scheme, launched in February 2006, provides a daily wage to unemployed workers at an average of Rs 100 per day upto 100 days in a year.

The scheme has come under considerable criticism from development economists and the like for its capacity to distort labour markets. Many have termed it just another version of a 'dole’. In a seemingly surprising move, the Union Budget 2012 however reduced the allocation for MNREGA from Rs 40,000 crore to Rs 33,000 crore.

At first glance, the move seems laudable and in keeping with the general subsidy reduction tenor of Finance Minister Pranab Mukherjee’s Budget speech on March 16, 2012. But as IndiaSpend’s Sourjya Bhowmick finds out, it’s not a reduction but rather a hike if you were to compare with what was actually spent last year, which was Rs 31,000 crore.

NREGA’s Finances

In the Union Budget for 2011-12, the NREGA allocation covered 46% of the total Rural Development Ministry allocations. Of the total outlay of Rs 40,000 crore, Rs 21,472 has been released to the states and union territories till now.

The total fund that was available to the states was Rs 41,615 crore, which also includes Rs 18,185 crore (as on April, 2011) opening balance. As per latest data available, Rs 21,125 crore have already been utilised till January, 2012.

This means that till now nearly 51% have been utilised. In FY 2009-10 and 2010-11, 77% and 75% funds were spent respectively. The remaining amount, we guess, was unspent either due to non submission of Project Implementation Plans or remains as balance.

NREGA Outlay Actually Hiked

Like we mentioned earlier, this year’s NREGA outlay is Rs 33,000 crore, Rs 7,000 crore less than the previous year’s outlay.

However, the revised estimates (2011-12), show the expenditure on NREGA last year to be Rs 31,000 crore. This year’s budgeted amount is thus actually Rs 2,000 crore higher than what was incurred last year.

Interestingly, the actual expenditure of NREGA in 2010-2011 was much higher, coming in at Rs 35,841 crore. However, the revised budget of 2011-2012 says that the amount has been Rs 33,000 crore.

Now let us take a look at a few indicators and NREGA’s performance based on those. The following table gives you an idea of how NREGA has done till now as compared to last year.

Source: Economic Survey 2012.

The percentage of share of women in total person days generated has stagnated but still it is well over 1/3^rd, which is targeted. Average wage has also increased.

Shortfalls of NREGA

However, there are a few major shortfalls which may have led to the reduction of the budgeted amount this year. When it comes to expenditure of the NREGA, the national average says that 63% of the available funds have been utilised. Moreover, there are wide variations in fund utilisation among the states.

A study by Delhi-based Accountability Initiative shows that between 2009-2010 and 2010-2011 states like Haryana, Bihar and Madhya Pradesh saw an improved spending of 19, 7 and 5 points. At the same time, Rajasthan and Orissa saw a decline of 10 points. Haryana had spent 93% of its funds, while Rajasthan spent only 56%. Wage increase also faces a variation in NREGA.

Maharashtra and Karnataka increased their wage by Rs 58 and Rs 40 respectively whereas daily wage in Rajasthan and Orissa declined by Rs 12 and Rs 10 respectively. The notified wage rate is Rs 120 in Tamil Nadu but they paid a daily wage of Rs 82 and Haryana has been reported as paying Rs 169 which is just Rs 10 below the notified Rs 179.

Delayed payments acted as a major impediment and thus the Central Government had notified to pay wages through banks and post offices. However, states like Tamil Nadu and Kerala continued to disburse payments through cash transfer.