Why in news?
The Union Ministry of Finance capped expenditure under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) at sixty per cent of its annual allocation for the first half of the fiscal year. This decision drew criticism because MGNREGA is a demand‑driven scheme meant to guarantee up to 100 days of work to rural households.
Background
MGNREGA was created in 2005 as a legal guarantee for rural employment. In recent years the scheme has suffered chronic fund shortages, wage arrears and delays. Nearly forty per cent of the budget each year goes to clearing unpaid liabilities from previous years, leaving little for fresh work.
Key points
- The finance ministry issued Monthly and Quarterly Expenditure Plans limiting spending to sixty per cent of the 2025‑26 allocation in the first half of the year. The cap is meant to manage cash flow but effectively restricts a statutory right.
- Households often receive only 47–52 days of employment instead of the guaranteed 100 days because funds run dry mid‑year. States are hesitant to demand additional work when funds are uncertain.
- Experts argue that capping expenditure undermines the demand‑driven nature of the scheme. Workers may be turned away or wages delayed if demand exceeds the cap.
- Almost one‑third of MGNREGA funds are used to clear pending wage arrears and material liabilities. Without adequate releases, arrears pile up and trust in the programme erodes.
Implications
- The spending cap is likely to suppress demand for guaranteed work and delay payments, violating the legal right to employment.
- Social audits and community monitoring become harder when funds are uncertain and work is curtailed.
- Policymakers need to ensure timely and sufficient releases to honour the statutory guarantee and restore confidence among rural workers.