Centre Caps MGNREGS Spending at 60% for First Half of FY 2025–26

For the first time since its inception, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has been brought under the government’s Monthly/Quarterly Expenditure Plan (MEP/QEP), capping expenditure at 60% of the annual allocation for the first six months of FY 2025–26. The move marks a significant shift from the scheme’s demand-driven nature and could impact employment generation under the scheme, especially with Rs 21,000 crore in pending liabilities carried over from the previous year.

Why in News?

The Finance Ministry has, for the first time, applied MEP/QEP spending controls to MGNREGS, capping H1 expenditure at 60% of the total outlay.The move is aimed at better cash flow management, though the Ministry of Rural Development had initially opposed it. With pending dues from FY 2024–25 and a high labour demand projection, this cap could impact the scheme’s effectiveness in rural employment.

Key Developments

• Annual MGNREGS Budget 2025–26: ₹86,000 crore
• H1 Spending Cap: ₹51,600 crore (60%)
• Expenditure till June 8, 2025: ₹24,485 crore (28.47%)
• Pending Liabilities: ₹21,000 crore (from FY 2024–25)
• Target Labour Budget: 198.86 crore persondays
• First Half Goal: 133.45 crore persondays (67.11%)

Background of MGNREGS

• Launched in 2006–07 in 200 backward districts.
• Expanded to 130 more districts in 2007–08 and nationwide in 2008–09.
• Provides guaranteed 100 days of wage employment to rural households.
• Played a critical role during COVID-19, with peak participation of 7.55 crore households in 2020–21.
• Employment demand has since declined, reaching 5.79 crore families in 2024–25.

What is MEP/QEP?

• Introduced by the Finance Ministry in 2017.
• Aims to manage cash flow and reduce unnecessary borrowing.
• Divides ministry budgets into monthly/quarterly segments for controlled disbursal.
• MGNREGS was previously exempt due to its demand-based nature.

Significance and Implications

• Positive Outlook
• Encourages fiscal discipline.
• Allows advance planning for employment generation.
• Aims to reduce idle fund accumulation.

Concerns

• Could delay wage payments or restrict employment due to high pending liabilities.
• May undermine the demand-driven essence of the scheme.
• Potential political backlash in rural areas during lean employment seasons.