Funding for the Rural Employment Program Begins Strongly
The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has experienced a strong start in the fiscal year 2025-26, with expenditures reaching ₹9,078 crores as of May 16. The primary contributors to this spending surge are Andhra Pradesh, Bihar, and Rajasthan, indicating a consistent demand for work. Currently, approximately 58% of the ₹15,611 crores allocated by the central government has been utilized. In the budget for FY26, the government has set aside ₹86,000 crores for this key initiative, maintaining the same level of funding as in FY25.
To date, the scheme has generated 29.69 crore person-days of labor, which could potentially approach the 286 crores reached in FY25. Of the total expenditure reported until May 16, ₹8,451 crores has been allocated for wages, ₹388 crores for materials, and ₹240 crores towards administrative costs. The average expenditure per individual per day stands at ₹316.1, a decrease from ₹390.5 in FY25. The demand for work has predominantly come from Andhra Pradesh, with 6.57 million households requesting jobs under the scheme, followed by Bihar with 4.39 million and Rajasthan with 3.65 million households.
Overall, the monthly workforce requests by households have remained steady, with 20 million seeking employment in April, compared to 18.6 million in March and 21.78 million in February. MGNREGS is designed to guarantee at least 100 days of wage employment per financial year to each rural household whose adult members are willing to engage in unskilled manual labor, particularly during off-peak seasons. The program saw its highest draw during the COVID-19 pandemic in FY21, where it peaked at approximately ₹1.1 lakh crores due to significant rural distress. Since that peak, expenditure has gradually declined as economic activity resumed and measures were implemented to address inefficiencies. Expenditures were ₹96,812 crores in FY22, ₹88,290 crores in FY23, ₹88,217 crores in FY24, and ₹85,771 crores in FY25.
The government has emphasized that the availability of funds is not an impediment for this demand-driven program, and that additional resources can be allocated as necessary to accommodate actual spending. Using the Public Financial Management System (PFMS), the government is now tracking fund usage in real-time, as the money flows from state treasuries to their respective nodal agencies (SNAs) for the scheme. During this process, the central government is also implementing various strategies to reduce instances of financial leakage, which some estimates suggest could be as high as 30% of the annual budget for the program.
Starting January 1, 2024, the Aadhaar-Based Payment System (ABPS) will be mandatory for disbursing wages. Under this system, workers must have their Aadhaar linked to their MGNREGS job card and bank account. The implementation of direct benefit transfers (DBT) has resulted in an estimated savings of ₹42,534 crores on wages by eliminating duplicate, fraudulent, non-existent, and ineligible beneficiaries as of March 2023.
