The RBI Monetary Policy Report has noted that the government’s flagship rural employment guarantee scheme has not been able to support rural income and this does not augur well for rural demand. This particularly at a time when “COVID-19 pandemic and subsequent lockdown are expected to bring down the aggregate demand drastically both in rural and urban areas.”

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Delayed wage payment, lower wages and insufficient budgetary allocations have been listed as reasons why the MGNREGA scheme doesn't seem to support rural income. India has a total of 13 MNREGA crore job cardholders.

For FY 2020-21, MNREGA budgetary allocation stands at Rs 61,500 crore, which is 13 percent lower than the Rs 71,002 crore revised estimates for FY 2020.

Since the performance of agriculture is key to rural demand in recent years, the terms of trade have moved against the farm economy, owing to excess supply, resulting in accumulation of stocks have depressed agriculture commodities prices even further, RBI says.

MNREGA was designed to ben an income support in these times. The RBI report dated April 9th says that growth in rural wages has remained subdued particularly for agricultural labour in both nominal and real terms partly due to the slowdown in the construction sector and government’s efforts may not be enough.

RBI says the governments slew of measures like direct cash transfer to farmers, hiking wages under MGNREGA scheme and utilization of welfare funds for construction workers to offset the adverse impact on rural demand. “Given the severity of the pandemic, rural demand is expected to go down further at least in the near future.”

FM Nirmala Sitharaman on March 26th, the second day of national lockdown, had announced an economic relief package worth Rs 1.7 lakh crore under the PM Gareeb Kalyan Scheme. Along with free ration as part of the package MGNREGA wages were raised to Rs 202 from Rs 182 earlier.

It was after 4 years that a big increase in MNREGA wages was announced. Last fiscal, the average wage hike was negligible. It is still 40-50 percent lower than Rs 345-385 per day, which is the prevailing minimum wages paid to unskilled agricultural workers.

The government had said this will give an additional Rs 2000 per worker, benefitting 5 crore families. However, experts have pointed out that MNREGA wage hike was has still not been listed as essential services and hence getting jobs in rural India, that can be managed with social distancing, is very difficult.

RBI report quotes the periodic labour force survey report released by the NSO in May 2019 that shows that wages under MGNREGA work are lower than the market wage rate for non-public work by 74 percent for rural men and 21 percent for rural women.

A critical drop in MNREGA works can be seen from the muster roll data on the MNREGA website. On April 8th just 5.5 lakh MNREGA worker names across the country were listed on the muster rolls. Compare this to March 31st when just one state of Rajasthan had 12 lakh workers on the MNRGA muster roll as these works were largely allocated in the pre-lockdown period.

India went on a 21-day nationwide lockdown from March 25th. As cities have closed down, migrant labourers have been moving back to their villages and need employment and wage support to sustain during the lockdown period.

Last year MNREGA saw a much higher demand in rural areas, indicative of the slowing economy and job losses owing to that. In current COVID19 crisis and lockdowns MGNREGA is what people will turn to for livelihood security, Nikhil Dey of the Mazdoor Kishan Shakti Sangthan said. “But the government is failing to utilise MGNREGA as an important instrument even now,” he added.

Social activists have been pushing the government to pay wages to the job card holders for the 21-day lockdown as MNREGA work may not be available.

Aruna Roy And Nikhil Dey filed a PIL in the Supreme Court pleading that all active job cardholders should be entitled to full time-rate wages for the duration of the COVID-19 lockdown period, similar to how the government has asked private firms to continue salaries.

The bigger issue has also been on delayed payments from the central government both on account of wages and for materials. Nearly Rs 10,000 crore is still pending to be paid as material payments and additional Rs5,500 crore pending as wages, Nikhil Dey noted.

RBI report highlights that unusually lower agriculture prices, slowdown in construction sector, below-average performance of MGNREGA contributed to lower farm incomes, deceleration in rural wages, and loss of employment opportunities in the rural sector.