Not to worry (yet) about MGNREGA rise

The reported rise in work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme in May over the previous month, as well as the year-ago period, should not raise any undue alarm over possible rural distress. GoI had expected a significant fall in demand for MGNREGA work with a rebound across other economic activity indicators. Data shows that work provided to households under it was 9.9% higher in May at 24.4 million compared to 22.2 million in May 2021, and 31.2% more than 18.6 million in April. Usually, May numbers are higher than April, though this is an unusual increase. But the numbers will get revised by the month-end, and any conclusion warrants more data. Also, as the rural economy prepares for kharif sowing, labourers will return to farm work, tapering the demand for MGNREGA.

Independently, Centre for Monitoring Indian Economy (CMIE) data shows stability in the employment rate at the macro level. This is reassuring. The employment rate rose marginally in May from April due to a small decline in labour participation rate, but a larger fall in unemployment rate. The shift in employment from agriculture to industry (particularly manufacturing) and services in April-May is welcome. Factory output also grew to an eight-month high of 7.1% in April despite a high base, signalling economic recovery.

Nevertheless, containing inflation, which can also be a possible reason for the increase in demand for MGNREGA, is an important task. Rightly, RBI has tightened policy rates, and the assessment of a normal monsoon bodes well to tame food inflation. Farm productivity should rise and investment must flow into infrastructure (building more roads and cold chains) to create more jobs and avert rural distress.


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