Demand for MNREGS jobs up, but may decline soon

Mint

8 hours ago

Demand for unskilled jobs under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) rose in May and spilled into the early part of June. Economists, however, said the clamour for jobs does not necessarily indicate a rise in rural distress, and that demand will wane once monsoon picks up and farmers start sowing.
According to the latest data from the rural development ministry, 28.39 million rural households sought work under the scheme in May, against 27.18 million a year earlier. In the first seven days of June, demand touched 13.48 million, compared with 26.40 million in all of June 2024.
The increase in demand in May and June came after demand cooled the previous month. In April, demand under MNREGS fell to 20.12 million from 21.52 million a year earlier.
The job guarantee programme assures up to 100 days of unskilled manual work annually to any adult in a rural household seeking employment. Demand for work typically rises when opportunities in farm or non-farm sectors decline.
Demand for jobs under MGNREGS typically rises during lean seasons when farming and construction activities decline, a government official said on the condition of anonymity. "Rural conditions are likely to improve in the coming months with forecasts of a better monsoon this year. However, uneven rainfall distribution remains a concern and will need close monitoring," the person added.
The latest data comes against the backdrop of robust rural consumption underpinning India's gross domestic product (GDP) growth of 7.4% for Q4 FY25 and an overall GDP growth rate of 6.5% for FY25. According to the National Statistics Office, rural consumption rebounded strongly in Q4, driven by improved agricultural output and rising incomes, significantly boosting overall GDP growth even as urban demand remained subdued.
'The rise in MGNREGS job demand is likely due to the pre-sowing phase,' said Madan Sabnavis, chief economist at Bank of Baroda. 'Once sowing begins, the numbers should decline, only to rise again ahead of the kharif harvest. It's a seasonal trend and not indicative of any distress," he added.
In FY25, demand for jobs under MGNREGS peaked in May 2024, followed by a steady decline over the rest of the year.
While an above-normal monsoon and early rains in FY26 bode well for the rural economy, economists said that the spatial distribution of rainfall must be closely monitored, especially as excess rains could hurt production in states where onions and potatoes are grown. "The earlier-than anticipated arrival of monsoon and its spatial distribution needs to be monitored closely as these perishable items have a cobweb impact on prices," Bank of Baroda said in a 5 June research note. "Thus, vigilance is required for any weather-related disruptions on prices in the coming days," it added.
Spokespersons for the ministries of finance and rural development did not respond to emailed queries seeking comment.
Interestingly, the Centre has kept allocations for FY26 at ₹ 86,000 crore, unchanged from the last fiscal. However, the official mentioned above had earlier said the Centre will review its accounts around September-October to evaluate if additional funding is needed for certain schemes, including MGNREGS. 'If needed, allocations for MGNREGS could be revised—but only after the half-yearly review and based on the scheme's funding requirements," the official had said.
To be sure, last December, the Parliamentary Standing Committee on Rural Development and Panchayati Raj had urged the government to consider revising and increasing wage rates under the MGNREGS.
The panel urged the rural development ministry to consult all stakeholders and revise MGNREGS wage rates, which have lagged behind inflation, stressing the urgent need for a fair and sustainable overhaul to protect rural workers' livelihoods.
India's economic growth has moderated in recent quarters, weighed down by a mix of domestic and global factors.
While GDP growth showed signs of recovery in the March quarter with a 7.4% surge—up from 6.2% in the previous quarter —FY25 growth at 6.5% fell well short of FY24's revised 9.2% expansion.
"The RBI retained their growth forecast at 6.5% y-o-y for FY26, noting strong agricultural sector growth and rural demand, and a resilient services sector underpinning a recovery in urban demand," Goldman Sachs said in a 6 June report.
"However, the governor also highlighted upside risks to the inflation outlook from weather and US 'reciprocal' tariff-related uncertainty," it added.