Demand under MGNREGS is not a true indicator of rural distress: Economic Survey

Demand under the Mahatma Gandhi National Rural Employment Guarantee scheme (MGNREGS) is not a real indicator of rural distress but is rather predominantly linked to the State’s institutional capacity and, to some extent, different minimum wages and other considerations, said Economic Survey presented in Parliament on Monday.

MGNREGS work demand does not directly correlate with increased rural distress at a micro level, it said, and further pointed out that it has evolved from being the last resort of village-resident families to more of a smart choice for household asset creation and sustainable income generation.

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The survey noted that there is a marked variation in the performance of the MGNREGS across states. “Multiple research studies have been conducted to find a definite cause for such unevenness in outcomes but a satisfactory explanation has not been found,” it said.

If MGNREGS demand is indicative of rural distress, as some reports suggest, the Survey said: “Data trends should show that States with more poverty and higher unemployment rates use more scheme funds and generate more employment person-days. Additionally, there might be a correlation between MGNREGS fund usage and reduced unemployment. MGNREGS wages could reflect state poverty levels.”

As studies earlier attempted to correlate MGNREGS demand with weather data to indicate real-time rural distress, the Survey said such a hypothesis needs verification.

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For instance, Tamil Nadu accounted for nearly 15 per cent of all MGNREGS funds released in FY24 despite having less than 1 per cent of the country’s poor population. Similarly, Kerala, with only 0.1 per cent of the poor population, used almost 4 per cent of the nation’s MGNREGS funds.

Together, these two states generated 51 crore person-days of employment. In contrast, Bihar and Uttar Pradesh, with about 45 per cent (20 per cent and 25 per cent, respectively) of the poor population, accounted for only 17 per cent (6 per cent and 11 per cent, respectively) of MGNREGS funds and generated 53 crore person-days of employment, it said.

“The correlation coefficient between state-wise multidimensional poverty index and person days generated is calculated to be only 0.3, indicating that MGNREGS fund usage and employment generation are not proportional to poverty levels,” Survey said.