Fiscal slippage due to higher spending in MGNREGA

Fiscal slippage due to higher spending in MGNREGA

Subject :Economy

Section: Fiscal Policy

1. Fiscal Slippage Warning:
   • Despite robust tax collections, India Ratings and Research express concerns about a possible fiscal slippage in FY24.
2. Deficit Projection:
   • Forecasts the fiscal deficit for FY24 to be 6%, exceeding the budgetary target of 5.9%.
3. Factors Contributing to Slippage:
   • Higher-than-budgeted revenue expenditure.
   • Expected first and likely second supplementary demand for grants.
   • Lower-than-budgeted nominal GDP.
4. Revenue Collections Impact:
   • Anticipates fiscal slippage despite favorable tax and non-tax revenue collections.
5. Offsetting Measures:
   • Higher revenue collections deemed insufficient to offset lower-than-budgeted divestment proceeds.
6. Fertilizer Subsidy Adjustment:
   • Highlights an adjustment in the fertilizer subsidy, increasing it from the budgeted ₹44,000 crore to ₹57,360 crore due to exhaustion of the budgeted amount by end October 2023.
7. MGNREGA Expenditure Surge:
   • Demand for employment under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
   • Expenditure till December 19 exceeds the budgeted ₹60,000 crore, reaching ₹79,770 crore.
   • Additional allocation of ₹14,520 crore through the first supplementary demand for grants.
8. Budgetary Challenges:
   • Indicates challenges in adhering to the budgetary targets due to increased spending on subsidies and employment guarantee schemes.
9. Nominal GDP Impact:
   • Cites lower-than-budgeted nominal GDP as a contributing factor to the fiscal slippage.
10. Concerns Despite Collection Growth:
    • Despite handsome growth in tax collections, concerns arise from higher expenditures in key sectors.

MGNREGA

MGNREGA stands for Mahatma Gandhi National Rural Employment Guarantee Act. It is a social security scheme that aims to provide livelihood and employment security in rural areas of India.

Here are the key features and objectives of MGNREGA:

1. Employment Guarantee: MGNREGA guarantees at least 100 days of wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work.
2. Scope of Work: The Act focuses on the execution of works related to water conservation, drought relief, and land development. Other permissible works include rural connectivity, flood control, and infrastructure development.
3. Right to Work: MGNREGA emphasizes the legal right to work for rural households, ensuring that they have the option of seeking employment when needed.
4. Equal Wages: The wages provided under the scheme are to be paid at a rate defined by the central government. There is a provision for equal wages for men and women.
5. Financial Inclusion: Payment of wages is done through bank or post office accounts to ensure transparency and prevent leakages.
6. Gram Panchayat Role: The Gram Panchayat is responsible for planning and executing the works under MGNREGA. Social audits are also conducted to ensure transparency and accountability.
7. Sustainable Development: The Act aims to create durable assets and enhance the livelihood security of the rural population. This involves focusing on works that have a long-term impact on the development of rural areas.
8. Women Empowerment: MGNREGA gives special emphasis on the participation of women in the workforce. At least one-third of the beneficiaries must be women.