Budget 2017: Actual MNREGA funds hike is just 1% and here’s why | union-budget | Hindustan Times
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Budget 2017: Actual MNREGA funds hike is just 1% and here’s why

In his budget speech on Wednesday, finance minister Arun Jaitley announced a record allocation of Rs 48,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) – prompting the obvious questions:

union budget Updated: Feb 02, 2017 07:36 IST
Aman Sethi
Union finance minister Arun Jaitley presents the Union Budget 2017-18 in Lok Sabha on Wednesday. (PTI Photo / TV Grab )
Union finance minister Arun Jaitley presents the Union Budget 2017-18 in Lok Sabha on Wednesday. (PTI Photo / TV Grab )(PTI)

In his budget speech on Wednesday, finance minister Arun Jaitley announced a record allocation of Rs 48,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) – prompting the obvious questions:

a) Is it really a record?

b) What were previous allocations like?

c) Is it enough?

Record: Yes or No?

In absolute numbers, yes.

But things get complicated from here on.

Jaitley’s allocation is indeed the highest-ever budgeted allocation for the MNREGA, and a 26% hike over the previous year’s budgeted allocation of Rs 38,500 crore – a scheme his Prime Minister, Narendra Modi, once derided as a “monument to the failure” of the previous United Progressive Alliance regime.

Yet a quick perusal of MNREGA accounts reveals that the total allocation for the scheme for 2016-17 was actually Rs 47,499 crores, once we include two supplementary tranches totally Rs 8,999 crore injected in August and December last year.

In this context, the actual increase for 2017-18 appears to be a far more modest Rs 501 crore, or a one percent increase, unless the government introduces supplementary allocations this year as well.

The big increase that has everyone excited was actually last year.

Why were supplementary allocations granted?

The MNREGA is a demand-driven programme, and so states must – by law - provide employment to anyone who asks for it, up to a maximum of 100 days per person per year.

Hence, states often spend beyond the allocated amount.

However, years of under-allocation – in 2012-13, the allocated was just Rs 29,387 crore, Rs. 33,000 crores in 2013-14 and 2014-15, and 36,967 in 2015-16 – have meant the scheme has run-up sizeable deficits that are rolled forward every year, with a portion of each year’s allocation eaten up by the previous year’s unpaid expenditure.

The paucity of funds meant that pending payments, which were just 932 crores in 2014-15, ballooned to about Rs 7,000 crores till date in 2016-17, according to analysis by the Centre for Policy Research.

This pending Rs. 7000 crores will eat into Jaitley’s allocation, making less funds available for commissioning fresh works.

So it this record allocation enough?

“It is hard to know,” said Avani Kapur, a Fellow at the Centre for Policy Research, who has studied MNREGA allocations and expenditure for the past eight years, “Total expenditure for 2016-17 is already Rs 53,594 crores.”

Thus, Jaitley’s record allocation of Rs 48,000 crore for 2017-18 does not even cover the cost of the MNREGA for the current year.

But this year’s allocation suggests that, after years of starving the scheme, the government is re-thinking its significance.

“To government’s credit, it is at least acknowledging the need to increase MNREGA allocations and expenditures,” Kapur said.