MGNREGS runs out of funds; Ministry seeks more budget

MGNREGS runs out of funds; Ministry seeks more budget


 Six months into the fiscal year, the major rural employment program, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), has run out of funding and is running a deficit of 6,146.93 crore, according to Ministry statistics posted on its website.

What is the MGNEGS?

The Mahatma Gandhi National Rural Employment Guarantee Act of 2005, better known as the MGNREGA or NREGA (Former name), is an Indian social welfare program aimed at protecting the “right to work.” On August 23, 2005, Prime Minister Manmohan Singh’s UPA government passed this law, and it went into force in February 2006 as a result of Minister for Rural Development Raghuvansh Prasad Singh’s parliamentary introduction of the bill.

What are the objectives of MGNREGA?

  • ‘Right to Work Guarantee: The main goal of MGNREGA is to give every rural household with adult members who are willing to perform unskilled manual labour a legal guarantee of at least 100 days of paid employment in a fiscal year.
  • Enhancing Livelihood Security: By giving households in rural areas regular and dependable job opportunities, MGNREGA hopes to improve the security of their means of subsistence.
  • Building Durable Assets: The act intends to build durable assets through labour-intensive activity, helping to develop rural infrastructure and resources, such as roads, canals, ponds, and wells.
  • Promoting Gender Equity: To empower rural women and advance gender equity, MGNREGA makes sure that one-third of the employment offered under the program is reserved for women.
  • Reducing Rural-Urban movement: MGNREGA intends to lessen the distress-driven movement of rural residents to urban centres in pursuit of livelihoods by creating employment opportunities in rural areas.
  • Environmental Protection: The act encourages practices that promote environmental preservation and sustainable development, such as water conservation, afforestation, and rural connectivity.
  • Fostering Social equality: MGNREGA works to advance social equality by giving underprivileged and marginalized groups in society equal employment opportunities.
  • Decentralized Implementation: The act promotes decentralization and community involvement by involving local self-government institutions (Panchayati Raj Institutions) in the scheme’s implementation.
  • Ensuring Transparency and Accountability: The MGNREGA places a strong emphasis on transparency and accountability in the way it is implemented, using tools like social audits, community watchdogs, and record-keeping.
  • Convergence with Other Programs: The legislation permits convergence with other development initiatives, guaranteeing that the MGNREGA’s efforts to create jobs do not compete with those of other programs.

How much budget is allotted for the year 2024?

  • The MGNREGS was granted 60,000 crore for the fiscal year 2023-24, which was 18% less than the budget forecasts of 73,000 crore and 33% less than the revised estimates of 89,000 crore for the previous fiscal year (2022-23).

Why is there a shortage of funds for the scheme?

  • Demand-Driven Design: MGNREGS is a demand-driven program. It guarantees employment to rural households depending on their labour demand. More funds are necessary to pay wages and support other rural development projects when there is a larger demand for labour. Work demand might change depending on circumstances such as agricultural seasons, economic situations, and rural suffering, among others.
  • Inflation and Wage Increases: Increases in the minimum wage and inflation might also contribute to a lack of finances. It becomes more expensive to provide work under the system when salaries rise owing to inflation or government-mandated increases. This can result in higher labour expenses and the requirement for more finances to meet the same level of employment demand.
  • Operational Costs: MGNREGS incurs operational expenditures linked to project planning, monitoring, and administration in addition to pay. These operating costs might put further strain on the budget as the program grows or confronts administrative issues.
  • Delayed Supplementary Budgets: Obtaining additional budgets to compensate gaps can often be delayed. Delays in approvals from the Finance Ministry or the parliamentary procedure can result in financial deficits and disrupt the program’s smooth operation.

What are the implications of the shortage of funds for the scheme?

  • Delayed Wage Payments: One of the obvious consequences of financing constraints is a delay in wage payments to rural workers on MGNREGS projects. This delay can have serious ramifications for daily wage workers who rely on regular payments to meet their fundamental requirements.
  • Reduced Work Allocation: When funds are scarce, the program may be obliged to limit the number of workdays or persons employed under the scheme. This means that fewer rural households will have access to employment possibilities, which negates the scheme’s goal of providing livelihood support.
  • Unpaid Wage Dues Backlog: As the budget gap widens, unpaid wage dues might accumulate. This backlog of unpaid salaries may cause financial hardship for labourers who rely on MGNREGS revenue.
  • Reduced Effectiveness: A lack of funding might lead to a reduction in the scheme’s overall effectiveness in attaining its goals. MGNREGS is intended to solve rural unemployment, poverty reduction, and rural development. These goals are jeopardized when it is unable to deliver sufficient work or timely wages.
  • Reduced Participation: Rural households may become deterred from participating in the program as a result of reduced labour allocation and delayed compensation. This may result in a decrease in demand for MGNREGS work, exacerbating the problem of unused funds.
  • Impact on Rural Development: MGNREGS also supports rural development activities such as infrastructure construction, natural resource conservation, and sustainable agriculture. A lack of money can impede the execution of these initiatives, jeopardizing rural development aims.


To summarize, the MGNREGS, India’s flagship rural employment program, is experiencing a financing shortfall in the current fiscal year. This is not an uncommon issue, as the scheme frequently faces budget cuts and relies on supplemental resources to meet demand for work on the ground. These financial concerns might cause wage payments to be delayed and job allocation to be reduced, reducing the scheme’s efficacy.