RURAL DISTRESS IN INDIA
1. Context
The Government has recently imposed a cap of 60 per cent on the spending under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) for the first half of the financial year 2025-26. Until now, the scheme has operated as a demand-driven programme with no such spending limit.
2. Demand for Work and Supply of Work(Availability)
- The year 2025 marks 20 years since the launch of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), introduced to ensure a minimum of 100 days of wage employment annually to at least one member of every rural household in India.
- The scheme was launched in response to falling real agricultural wages in the aftermath of the 1991 economic liberalisation.
- Rooted in the MGNREGA Act of 2005, the initiative also reflected a broader vision of rural development focused on poverty alleviation and capital asset creation.
- Over the years, MGNREGS has remained relevant, playing a critical role during the Covid-19 lockdown by offering employment to a large number of returning migrants.
- Yet, in recent times, the programme has faced multiple challenges, such as insufficient funding and delays in wage payments.
- By 2018–19, only 7.4% of rural households, on average, completed the full 100 days of work. In 2023–24, the average number of days worked per household under the scheme dropped to just 52.
- Since the pandemic, there has been a noticeable increase in demand for MGNREGS work, reflecting deeper rural distress. The widening gap between the demand for jobs and the limited availability under the scheme points to ongoing employment challenges in rural India.
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Data from the Centre for Monitoring Indian Economy (CMIE) underscores this distress through indicators such as:
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3. Agriculture and rural development
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- Agriculture continues to be the largest source of employment in India, engaging around 46% of the workforce in 2023–24, yet contributing only 16% to the national GDP. Over the past eight years, the sector’s real Gross Value Added (GVA) has grown at an average rate of 4.9%.
- For FY 2025, agricultural growth is projected at 4.6%, an improvement over the 2.7% growth in FY 2024. This optimistic outlook stems from expectations of a strong Kharif crop, though it remains dependent on favorable Rabi (winter) harvests, which in turn rely heavily on climatic factors.
- India’s agricultural labour force comprises two primary groups:
🔸 Cultivators – those who own or manage land through leases or agreements
🔸 Agricultural labourers – those who work on land owned by others in exchange for wages (in cash or kind) - Despite positive growth trends, real wages for agricultural workers have shown minimal improvement. Additionally, the rise in agriculture’s share of total employment—from 42.5% in 2018–19 to 46.1% in 2023–24—signals deeper structural concerns both within the sector and the broader economy.
- The fallback role of agriculture was especially visible during the Covid-19 pandemic, when rural households and returning migrant workers turned to farming as a last resort in the absence of other livelihood opportunities.
- These trends highlight that while agriculture remains a critical safety net for rural labour, sustained growth and improved farmer incomes will require significant public investment and comprehensive structural reform
4. Effect of the Green Revolution on the Rural economy
- As per the All India Rural Financial Inclusion Survey (2021–22) conducted by NABARD, the average monthly income of agricultural households stood at ₹13,661, slightly higher than ₹11,438 earned by non-agricultural households. For those engaged in agriculture, cultivation contributes about one-third of their total earnings, making it their primary income source.
- Agricultural households have also exhibited greater income diversification, tapping into multiple sources compared to their non-agricultural counterparts. The rise in non-farm employment opportunities among rural families is closely tied to the evolution of India’s rural economy, particularly after the Green Revolution.
- India’s economic growth from the 1960s to the 1980s was modest, with the late economist Raj Krishna describing it as the "Hindu rate of growth," typically around 4% per annum. In the 1960s, agriculture grew at about 1% annually, which slightly improved to 2.2% between 1968–69 and 1975–76.
- The Green Revolution in the early 1970s helped India attain self-sufficiency in foodgrains, especially rice and wheat. However, the benefits were not evenly distributed, as it led to:
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Increased regional imbalances
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Neglect of rainfed regions
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Decline in cultivation of nutritional crops like millets and other non-food grains
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Marginalization of small and resource-poor farmers
5. Non-agricultural employment
- An ongoing discussion around India’s Green Revolution focuses on its connection to the rise of the rural non-farm sector. The commonly accepted view suggests that increased agricultural productivity and farmer incomes—driven by Green Revolution technologies—help stimulate consumption-led demand for goods and services, particularly those provided by small-scale, labour-intensive rural enterprises.
- This upward demand cycle also encourages backward linkages, fueling growth in agro-processing industries. States such as Punjab, Haryana, and West Bengal are often cited as examples where such positive economic patterns emerged.
- On the other hand, an alternate viewpoint argues that due to high input costs and unequal distribution of gains, many rural households were compelled to seek non-farm employment out of necessity rather than opportunity. In this context, rural non-farm employment is often seen as a distress-driven shift rather than a result of prosperity.
- There is growing evidence that rising cultivation costs—including expenses related to labour, fertilizers, and machinery—are forcing many farmers to rely heavily on loans to sustain their agricultural operations.
- The broader concern is that, despite growth within the agricultural sector, rural workers continue to face significant employment challenges. While supply-side reforms—such as easier access to credit, lower corporate taxes, and improved ease of doing business—are important, they do not sufficiently tackle the core issues of job creation and employment quality for the rural population.
- Schemes like MGNREGS, which are legally mandated to provide employment, are constrained by budgetary limits, undermining their demand-based framework. In addition, there is a pressing need to enhance public investment in agriculture, particularly in areas such as irrigation infrastructure, storage facilities, and climate-resilient practices.
- Both agriculture and MGNREGA served as fallback options for rural labour during the COVID-19 lockdown, a reality that should inform future policy design and investment priorities
6. MGNREGS Scheme and Employment generation
- The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), launched in 2006 under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005, represents one of India's most ambitious social security initiatives aimed at promoting livelihood security and rural development.
- The core objective of the scheme is to provide at least 100 days of guaranteed wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work.
- MGNREGS plays a dual role. On one hand, it offers employment support to the rural poor, especially during times of economic hardship or seasonal unemployment.
- On the other, it contributes to the creation of durable community assets such as rural roads, water conservation systems, and soil health improvements. This not only enhances the productivity of rural areas but also fosters inclusive and sustainable development.
- The scheme is designed to be demand-driven, meaning that employment must be provided to anyone who seeks work under the Act. If work is not provided within 15 days of application, the applicant is entitled to receive an unemployment allowance.
- This legal guarantee distinguishes MGNREGS from other welfare programs by making employment a right for rural citizens.
- In terms of employment generation, MGNREGS has been a lifeline for millions of rural households, particularly in times of crisis. During the COVID-19 pandemic, for instance, the scheme played a crucial role in absorbing a large number of migrant workers who had returned to their villages after losing jobs in urban centers.
- The scheme’s flexibility, local orientation, and scale enabled it to respond to rural distress more quickly than many other programs.
- Despite its potential, MGNREGS has faced challenges in fulfilling its employment-generation promise. Over the years, budget allocations have been inconsistent, often failing to match the growing demand for work. Wage payments have frequently been delayed, undermining the scheme’s reliability.
- Moreover, while the Act promises 100 days of work per household, data show that on average, most households receive far fewer days — often around 40 to 50 days — due to fund shortages or administrative bottlenecks.
- Nevertheless, the employment-centric nature of MGNREGS, especially in a context of slow rural job growth and limited non-farm opportunities, remains crucial. The scheme not only supports rural livelihoods but also enhances workers’ bargaining power, improves local infrastructure, and contributes to the broader goal of rural poverty alleviation.
- In many states, it has also contributed to the empowerment of women, as a significant proportion of the workforce under MGNREGS comprises female workers
7. Way Forward
While MGNREGS is not without flaws, it remains a cornerstone of India’s rural employment strategy. Its future success will depend on timely funding, efficient implementation, and a renewed commitment to its rights-based framework. Strengthening the scheme could be a vital step toward addressing the persistent challenges of underemployment, rural distress, and income inequality in the Indian economy
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For Prelims: MGNREGS Scheme, Green Revolution, Gross Value Added (GVA), Kharif crop
For Mains: GS III - Rural Economy
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Previous Year Questions
Prelims
1. Among the following who are eligible to benefit from the “Mahatma Gandhi National Rural Employment Guarantee Act”? (UPSC 2011) (a) Adult members of only the scheduled caste and scheduled tribe households Answer: D 2. The Multi-dimensional Poverty Index developed by Oxford Poverty and Human Development Initiative with UNDP support covers which of the following? (UPSC 2012)
Select the correct answer using the codes given below: (a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3 Answer: A 3. Which of the following grants/grant direct credit assistance to rural households? (UPSC 2013)
Select the correct answer using the codes given below: (a) 1 and 2 only (b) 2 only (c) 1 and 3 only (d) 1, 2 and 3 Answer: C 4. How does the National Rural Livelihood Mission seek to improve livelihood options of rural poor? (UPSC 2012)
Select the correct answer using the codes given below: (a) 1 and 2 only (b) 2 only (c) 1 and 3 only (d) 1, 2 and 3 Answer: B 5. Under the Pradhan Mantri Awaas Yojana-Gramin (PMAY-G), the ratio of the cost of unit assistance to be shared between the Central and State Governments is: (MP Patwari 2017) A. 60:40 in plain areas and 90:10 for North Eastern and the Himalayan States
B. 70:30 in plain areas and 80:20 for North Eastern and the Himalayan States
C. 50:50 in plain areas and 70:30 for North Eastern and the Himalayan States
D. 75:25 in Plain areas and 85:15 for North Eastern and the Himalayan States
Answer: A
Mains
1. The basis of providing urban amenities in rural areas (PURA) is rooted in establishing connectivity. Comment (UPSC 2013)
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Source: indianexpress
