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Sharp 50% rise in NREGA jobs demand amidst lack of sufficient budgetary allocation

Counterview Desk
The People's Action for Employment Guarantee (PAEG), a group of activists, academics and members of peoples' organizations has started what it has called National Rural Employment Guarantee Act (NREGA) implementation tracker to monitor the implementation of India’s top job guarantee scheme amidst reports of a sharp 50% increase in households employed in June 2020 compared to June 2019.
The tracker, to be a weekly exercise, seeks to assess if NREGA, supposed to be the lifeline for millions of rural poor has been able to guarantee 100 days of employment for each rural household at minimum wages, whether work is provided within 15 days of demanding for work, failing which the workers are entitled to an unemployment allowance, and whether workers are paid within 15 days of completion of work, failing which they are entitled to a delay compensation.
The first NREGA tracker report says, “While NREGA has always been vital, it has assumed renewed significance in light of the unemployment crisis induced by the lockdown.” Banking on official data from the NREGA Management Information System (MIS), the tracker shows the inflation-adjusted budget over the years and the pending liabilities as a proportion of the annual budget.

Excerpts:

Returning migrants and the stagnation in the rural economy has increased demand for NREGA employment and new households are registering for job cards and work. The Finance Minister cited a figure of 8 crore for the number of migrants that were to be allocated free foodgrains for three months. According to official data, 67 lakh migrants have returned home.
A record number of households have been employed under NREGA in the first quarter of the financial year. There was a 50% increase in households employed in June 2020 (3.22 crore) compared to June 2019. April 2020 recorded the lowest employment in several years. Currently, almost every ten days, 1 lakh households are completing 100 days of work.
This is a testament to NREGA's continued importance and underscores the need to increase NREGA entitlement to at least 200 days per household. The scale of NREGA employment is much higher in states like Andhra Pradesh (1.04 lakh), Telangana (72,000) and Chhattisgarh (57,000). 
NREGA performance in aspirational districts, announced by PM on June 20, shows only 1 out of 3 households got more than 30 days' work
About 1.7 crore people who have demanded work have not been provided employment. 22% of officially registered demand is unmet. For instance, in Uttar Pradesh 35 lakh persons who have demanded work are yet to be provided work. In Bihar, this figure of unmet demand is 10 lakh persons. 
An important point to note is that these figures are on the conservative side. Actual unmet demand will be much higher because of demand suppression at source: The clock starts ticking only after the work demand of workers is officially entered in the MIS. If work is not provided within 15 days, unemployment allowance has to be paid.
It is the responsibility of local officials to pay unemployment allowance in case work is not provided on time. In the absence of alternative modes of registering demand people have no choice but to depend on local officials to register work demand on the MIS. However, local officials will tend to limit the number of demands for work applications that are registered to avoid payment of unemployment allowance.
Lack of sufficient budget allocation also leads to demand suppression. While employment generated in Persondays (PD) is available easily in the MIS, work demanded in PD is not easily available. Only number of households demanding work and number of individuals demanding work are.
Why is it important to have PD work demanded? Suppose there are 2 people in a household. Suppose each person demands for 7 days of work and each of them gets just 3 days of work. For this case, the number of individuals demanding work would be 2, the number of individuals provided work would also be 2. For the number of households demanding work would be 1 and number of households provided work would also be 1.
However, the number of PD of work demanded would be 14 while the number of PD of employment provided would be 6. For this example, while employment provided in PD is 57% lower than work demanded in PD, the MIS is currently reflecting that 100% of work demanded is being provided. Therefore, the PD of work demanded must be made available along with the PD of employment provided. This will be a more accurate way to track NREGA progress.
Payment of wages to workers happens in two stages. Stage 1 corresponds to the time taken by the states to generate the Funds Transfer Order (FTO) and electronically send them to the central government. Stage 2 is the time taken by the central government in processing the FTOs and transferring the wages directly to the workers’ accounts.
The Supreme Court (SC) judgement dated May 18, 2018 in Swaraj Abhiyan vs Union of India, Writ Petition (CIVIL) 857 of 2015 clearly holds the central government accountable for the full extent of delay (Stage 1+Stage2). The SC has instructed the central government to calculate the delay compensation for stage 2 and pay the same to the workers. However, even after 2 years, only Stage 1 delays continue to be calculated. Stage 2 delays are still not getting accounted for.
NREGA performance in aspirational districts shows that only 1 out of 3 households got more than 30 days of work. In response to the migrant workers’ crisis, the Prime Minister launched the Garib Kalyan Rojgar Abhiyan (GKRA) on June 20 in 116 districts for 125 days. In a sample of 10 out of the 116 GKRA districts, in Araria, for every 100 households that demanded work, 1/4th of all the households demanded work were not provided work.
Average of 17% is spent to clear pending liabilities for 2020-21, 10% of budget has been used to clear pending liabilities after revised allocation. With the 2020-21 budget for NREGA being the highest ever, the proportion that will be spent to clear pending payments is lower than previous years.
In the last few years, it has been claimed that the NREGA budget allocation is “the highest ever”.  
However, adjusting for inflation, the allocation each year from 2014 has been lower than that of 2010-11. The allocation has been dwindling around 0.3% of GDP since 2014. It has never crossed the high of 0.6% of GDP touched in 2010.
The allocation has been dwindling around 0.3% of GDP since 2014. It has never crossed the high of 0.6% of GDP touched in 2010. Even with increased allocation of 1 lakh crore for NREGA this year, in response to the pandemic, it is only around 0.47% of the GDP. World Bank Economists, Murgai and Ravallion (2005), have argued that 1.7% of the GDP needs to be allocated for NREGA for it to run robustly.
With Rs 43,000 crore spent already, 43% of the total budget for 2020-21 has been spent in the first quarter. Even with the highest ever allocation for NREGA this year, the record demand and employment provision in the first quarter means that funds are drying up fast. While Odisha is a good example of a state that has leveraged NREGA to respond to the distress of returning migrants and the unemployment crisis, it already has a negative balance. 

States like Bihar, Madhya Pradesh, Uttar Pradesh which have among the highest unmet work demand also have less than 10% of their allocated funds left. This will have two potential consequences on the ground. Either local officials will stop registering more demand and opening work or work will be provided but payment delays will accumulate.

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