Presenting his third budget, Finance Minister Arun Jaitley announced an outlay of Rs 38,500 crore to the Mahatma Gandhi National Rural Employment Guarantee scheme. This was the second consecutive year the finance minister increased the outlay for the rural works scheme, which Prime Minister Narendra Modi had last February attacked as a rural development scheme that his government intended to continue as a “living monument to the failures of the Congress.”

In his budget speech on Monday, Jaitley said the outlay of Rs 38,500 crore, which “if it is spent, will be the highest ever expenditure on MNREGA.” Specifically, this amount will be focused on taking up public works to create “five lakh farm ponds and dug wells in rain fed areas, and ten lakh compost pits for production of organic manure” in rural areas, Jaitley stated in his speech.

But the outlay announced by Jaitley was already exceeded two years back. As per ministry of rural development data, in 2013-14, the last year of United Progressive Alliance government recorded an expenditure of Rs 38,552 crore, higher than the figure mentioned by Jaitley. It was the highest in 2010-11 when expenditure on the scheme was Rs 39,377 crore. The outlay for 2016-17 is, however, the highest outlay by the Modi government since last year’s outlay was Rs 34,699 crore, and in the year prior to that it was Rs 34,000 crore.

“A cut in real terms”

The highest-ever outlay to the scheme since the beginning of the scheme in 2006 was in 2010-11 of Rs 40,100 crore. The latest budget outlay continues the trend of a decline in real terms if accounted for inflation. It also masks the acute shortage of funds in the rural scheme on the ground in 21 states, including in eight drought-affected states.

A substantive portion of the current outlay will get spent in simply meeting the pending liabilities of Rs 6,359 crore from the budgetary allocation from the last financial year, and maintaining previous last year’s levels of employment in the programme and accounting for inflation would require a minimum requirement of Rs 47,549 crore, noted the People’s Action for Employment Guarantee, a coalition of organisations that had led a campaign for passing of the employment guarantee law.

The group noted that including the lag in data entry and employment during the month of March 2016, which is still pending, any allocation less than Rs. 50,000 crore is insufficient as per current rates of employment and in fact amounts to a budget cut.

Farm distress

The government’s renewed attempt to focus on MNREGA is an attempt to boost rural demand when nearly a third of all districts in the country are affected by drought and witnessing acute farm distress.

Under the rural employment guranteee scheme, the government provides a guarantee of upto 100 days of wage employment in villages to any household willing to do manual work.

Last year, the rural development ministry allowed eight states that had notified a drought to provide an additional 50 days of employment under the scheme in the areas where farmers are facing distress. However, no additional funds were provided to the states for providing these additional days of employment.

Social activists and development economists point out that successive government have been undermining the demand-driven nature of the programme.

Instead of open-ended, demand-based provision, the government has been binding states to a “quota based labour budget”, beyond which states are not encouraged to exceed, noted the the People’s Action for Employment Guarantee in its statement.

In the last budget, while announcing an outlay ofRs 34,699 crore, the finance minister had announced that the government will provide an additional Rs 5,000 crore to the programme, if the need arose later in the year. But this was not done.

In January, a right to information application filed by the activists of the Mazdoor Kisan Shakti Sangathan revealed that the minister of rural development Birendra Singh Chaudhary wrote to the finance minister on December 31 citing an acute shortage of funds in the programme in a year of farm distress. He asked for release of the additional Rs 5,000 crore promised by the finance minister as 12 states had exhausted their entire outlay of funds by December.

“Of this amount, the finance minister disbursed only Rs 2,000 crore to the ministry,” said Nikhil Dey, an activist with the Mazdoor Kisan Shakti Sangathan. “Documents accessed through RTI reveal that several states have been crying for funds. If this pattern continues this year, the workers in the programme will get neither work nor wages on time,” he said.