Finance ministry may grant NREGS Rs 28,000 cr more, over and above budgeted Rs 60,000 cr

The finance ministry could allocate about Rs 28,000 crore more for the rural job guarantee scheme this fiscal year, topping the budgeted Rs 60,000 crore, in the first batch of supplementary demands for grants, as work demand under the programme has beaten initial projections, a person aware of the details said.

About 95% of the FY24 budgetary allocation has already been released to meet increased expenditure under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

“In the pre-budget meeting earlier this month, the finance ministry got a request from the rural development ministry for additional funds for MGNREGS. And it was decided that an additional Rs 28,000 crore or thereabouts would be granted. This should take care of the increased requirement this fiscal,” the person told ET.

Extra funds for MGNREGS will be among the top items when the government presents the first batch of supplementary demands for grants for FY24 in the next session of Parliament. The finance ministry’s pre-budget meetings with various departments and ministries will continue up to November 14.

Once cleared, the additional funds would take the total MGNREGS outlay for FY24 closer to the last year’s level of about Rs 90,000 crore.

Officials said the government would stick to its FY24 fiscal deficit target of 5.9% of gross domestic product, as additional fund allocations for various ministries will be substantially met through savings in other spending heads and compression of certain wasteful expenditures. They also expect revenue collections to improve in the coming months.

Belying official expectations of a drop in demand, more people sought work under the MGNREGS in the first half of FY24 from a year before, partly due to an erratic monsoon that prevented the usual migration of workers to farming, and a tentative industrial recovery, experts have said. An up to 10.4% increase in wage rates under the MGNREGS, too, drove up expenditure under the programme.

On top of these, an expected shift of workers to sectors such as rural housing and water that witnessed a spike in the FY24 budgetary outlay didn’t quite materialise. MGNREGS work demand has particularly remained high in the aftermath of the pandemic.

Finance minister Nirmala Sitharaman had pledged more funds for the scheme if required.

The person-day work generation, which influences the budgetary allocation for MGNREGS, has hit 86% of the full-year (FY24) target so far, according to preliminary data compiled by the rural development ministry.

Person-days generated under the scheme rose almost 9% between April and September from a year earlier to almost 1.87 billion, the data showed. About 192.6 million individuals opted for work under the scheme until September this fiscal year, up 4.6% from a year before.

Members of 150.6 million households demanded work in the first quarter, up over 8% from a year before. The data typically get revised as and when updated information flows in.

Anticipation of a pickup in economic activity and the shift of workers to other rural schemes had prompted the government to trim its FY24 budgetary allocation for MGNREGS by a third from the year earlier to Rs 60,000 crore.