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Budget 2017: Why the additional MNREGA spend might not be enough

By Sarika Malhotra     February 1, 2017

With country grappling with the after effects of job losses in the informal sector post demonetization, the highest ever budget allocation of Rs 48,000 crores for Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) might not well be enough.

The Finance Minister increased the MNREGA allocation from Rs 38,500 crores in 2016-17 to Rs 48,000 crores in 2017-18. Reetika Khera, a development economist, and Professor at IIT Delhi said that in the light of the fallout of demonetization and the technocratic barriers in implementation of NREGA, the allocation is woefully inadequate. "Further, once we factor in inflation to look at the change in real terms, that there is hardly any increase over the previous year's revised estimates. The allocation to NREGA is disappointing as it remains inadequate in comparison to demand: there have widespread reports of job losses in the informal sector and many people are turning to NREGA to tide over these bad times," she said.

As per estimates, demonetization may well trigger some 4,00,000 job losses in the informal space thus  putting much strain on the rural economy and eventually on rural spend. Experts feel that this may well have a sprawling affect on the overall economic recovery and sentiment post demonetization.


Arun Kumar, former Professor JNU said that the amount was not enough, given the distress in rural India. "Due to job losses, many people are migrating back to their villages. Demand of jobs are up by 60 per cent in rural area and Rs 10,000 crore is not enough to fill in the growing demand of rural employment.

The FM pointed out that MGNREGA should create productive assets to improve farm productivity and incomes. The target of 5 lakh farm ponds and 10 lakh compost pits announced in the last Budget from MGNREGA funds will be fully achieved. In fact, against 5 lakh farm ponds, it is expected that about 10 lakh farm ponds would be completed by March 2017.  During 2017-18, another 5 lakh farm ponds will be taken up. This single measure will contribute greatly to drought proofing of gram panchayats.

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