MGNREGA Spending Cap: Implications for Rural Employment & Welfare Schemes | Exam Analysis

The Policy Shift Explained
In a historic move, the Finance Ministry has placed MGNREGA under the Monthly/Quarterly Expenditure Plan (MEP/QEP) – imposing a 60% spending cap (₹51,600 crore) for April-September 2025. This ends MGNREGA’s 20-year status as an unrestricted demand-driven scheme, where funding scaled with rural employment needs.

Key Implications for Vulnerable Sections
Carryover Crisis: ₹21,000 crore pending liabilities from FY 2024-25 will compete with new allocations, risking delayed wage payments to workers.
Reduced Person-Days: With 67% of 198.86 crore person-days planned for H1, the cap may force states to reject work requests during peak summer/monsoon distress periods.
West Bengal Exclusion: 5.79 crore families accessed MGNREGA in 2024-25 – excluding WB where the scheme remains suspended since 2022.

Governance Challenges
Legal Breach?: Finance Ministry flagged pending wages beyond MGNREGA’s mandated 15-day payment window as “procedural violation”.
Audit Gaps: Social audits – the scheme’s accountability backbone – remain underfunded and fragmented across states.
Migration Impact: Post-COVID, declining beneficiary families (7.55 crore in 2020-21 → 5.79 crore in 2024-25) suggest reduced efficacy in curbing distress migration.

Why This Matters
“The cap reflects fiscal austerity but risks undermining MGNREGA’s core purpose: acting as a safety net during agrarian crises and seasonal unemployment.”
States like Bihar, Jharkhand, and Odisha – with high backwardness indices – could face the sharpest impact during lean agricultural seasons.
 
UPSC-Focused Q&As
Q: Which ministry governs MGNREGA implementation?
A: Ministry of Rural Development (MoRD).
Q: How does MGNREGA help reduce distress migration?
A: By providing guaranteed 100-day work near villages, it offers livelihood alternatives during agricultural off-seasons.
Q: What is unique about the FY 2025-26 MGNREGA spending cap?
A: First-ever H1 limit (60% of ₹86,000 crore) via the MEP/QEP system, abandoning its demand-driven structure.
Q: Define ‘Social Audit’ in MGNREGA context.
A: Grassroots public hearings where villagers scrutinize scheme expenditures and worksite records.
Q: Why was West Bengal excluded from 2024-25 beneficiary data?
A: MGNREGA remains suspended in WB since March 2022 due to central-state fund misuse disputes.