Of disappointment and pain: Why linking MGNREGA wages to inflation won’t fix the problem!
Wages being paid under the MGNREGA is less than the minimum wage in 34 of the 35 states and union territories after it recorded the lowest hike since its inception earlier this year.
The Indian economy is losing steam. The gross domestic product (GDP) slumped to a six-year low this quarter to record a meagre 5 per cent growth. The automobile sales in August declined by nearly 25 per cent year-on-year and about 2 lakh people lost their jobs. Growth in exports and imports has slowed down over the past five years and the average annual industrial growth rate in the same period is a dismal 3.5 per cent.
In the early 2000s, when the economy was decelerating, the AB Vajpayee-led government triggered a cycle of infrastructure-led growth by launching the Golden Quadrilateral project to connect India’s metro cities by high-quality roads and the PM Gram Sadak Yojana to connect all villages by motorable roads.
And in a bid to address the current slump in demand and a slowdown in the rural economy, the Narendra Modi government 2.0 plans to inject more money into the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) by linking wages under the Act to an updated inflation index.
Except that it won’t help much!
“They hadn’t increased the allocation under MGNREGA earlier. In that sense, it’s not really a fresh injection. Yes, nominally it will increase but in terms of changing the real allocation, there won’t be much difference,” JNU assistant professor Rohit Azad said.
“It’s like giving with one hand and taking from another. If it’s not going to affect the overall expenditure, then where is the injection of demand going to come from.”
“As long as the wages increase, workers are going to benefit from it,” JNU professor Himanshu said. “But the only question is by how much? Is it going to enough to meet the demand in the economy or not? Rs 5 or Rs 10 increase won’t make a difference—it has to be at par with the market wages.”
And that’s exactly where the key problem lies.
There’s a divide
The national average wage of an MGNREGA worker is Rs 178.44 per day, less than half of the Rs 375 per day minimum wage recommended by a Labour Ministry panel earlier this year.
In fact, wages being paid under the MGNREGA is less than the minimum wage in 34 of the 35 states and union territories after it recorded the lowest hike since its inception earlier this year.
The hike, which ranges from Re 1 to Rs 17, didn’t figure against the names of six states and UTs. The average wage rate increase is 2.6 per cent.
Goa saw the biggest gap as the increased MGNREGA wage is only 62 per cent of the state minimum wage for agriculture. Several other states, like Bihar, Gujarat, and Odisha, fall in the 60-70 per cent range.
According to the latest Periodic Labour Force Survey, market wages for men were higher than MGNREGA wages by 74 per cent in 2017-18, while for women, it was a 21 per cent gap.
Rohit said that even if there’s an increase in the wages, it will come at a cost of some other expenditure.
“If the taxes are not rising—in all likelihood GST has fallen short of the expectation and with lower income, the direct taxes income taxes is not going to be expected—they’ll have to cut down fiscal deficit. So, in terms of net effect, it’s going to be negative unless they revise the fiscal deficit target,” he explains.
There’s little to no work
MGNREGA provides at least 100 days of guaranteed wage employment in a fiscal year to any rural household whose adult members volunteer to do unskilled manual work on demand.
On average, only 35 days of employment has been provided per household according to the official numbers available on the MGNREGA website. This figure was 51 days in FY19, 46 in FY18 & FY17, and 49 in FY16.
The world’s largest public works programme that provides a social security net for 15 per cent of our country's population also suffers from insufficient funds allocation. And that’s happening even with existing wages. What’s more, they aren’t even paid wages on time. A study by Azim Premji University has found that 78 per cent of payments were not made on time, and as many as 45 per cent payments did not include compensation for delayed payment as per guidelines which are 0.05 per cent per day of the wages earned.
MGNREGA received a budgetary allocation of Rs 60,000 crore, of which more than 75 per cent has already been released by the Centre even before the halfway point of the year. Last week, the RD Ministry asked the Finance Ministry for an additional supplementary grant of Rs 15,000- Rs 20,000 crore.
Prima facie, millions of rural workers sure might get excited, but in reality, it carries only disappointment and pain.