MGNREGS Allocation Likely to Remain Unchanged for FY25 Amidst Stronger Rural Economy

Introduction

As the Indian government shifts focus towards a growing rural economy driven by favorable monsoon conditions, the allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is expected to remain unchanged for FY25, despite rising demand for rural employment in previous years. This decision comes on the back of improved rainfall and a boost in agricultural activity, both of which have led to a stronger rural economic outlook.

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Government Signals No Additional Allocation for FY25

The central government has allocated ₹86,000 crore towards MGNREGS for FY25, the same as the revised allocation for FY24. However, experts and insiders believe that further increases in MGNREGS funding are unlikely, barring major disruptions in the rural economy such as a drought or poor monsoon.

MGNREGS: A Lifeline for Rural India

MGNREGS has been a key safety net for rural households, providing guaranteed wage employment for at least 100 days a year to the poorest families in rural India. In FY24, the scheme saw high demand, with spending overshooting the initial budget estimates. The revised allocation of ₹86,000 crore for FY24 fell short of actual spending, which reached ₹1.06 trillion by the end of the fiscal year, reflecting the demand for rural jobs amidst a weaker rural economy.

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Fewer Days of Employment in FY25

As rural job opportunities improve, the average days of employment provided under MGNREGS have seen a sharp decline. Between April 1 and September 23, 2024, the average days of employment per household stood at 33.93, significantly lower than the 52.08 days recorded in FY24. The total number of households employed under the scheme during the same period also declined, with 44.3 million households participating in FY25 compared to 60 million in FY24.

Rural Economic Growth Outpacing Urban Counterparts

The rural economy is showing signs of outpacing urban growth, driven by favorable monsoon conditions and improved sowing data. According to official figures, overall private consumption growth surged to a two-year high of 7.4% in Q1, FY25, compared to 4% in Q4, FY24, and 5.5% during the same period in the previous year. Although separate data on rural consumption is not available, the uptick in overall consumption suggests that rural demand is on the rise.

Conclusion: A Balanced Approach to Rural Welfare

While MGNREGS continues to serve as a vital safety net for rural India, the government's decision to maintain the allocation for FY25 reflects its confidence in the resilience of the rural economy. With improved rainfall, better sowing data, and rising rural demand, the need for additional MGNREGS funding is expected to decrease. However, the scheme remains a critical fallback in the event of any unforeseen challenges, ensuring that rural households have access to guaranteed employment when needed.

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