Decline in MGNREGA Work Demand
The demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has considerably decreased, pointing towards improving economic conditions in rural India.
- Households seeking work fell by 35.3% in October compared to the previous year.
- The number of rural workers relying on the scheme decreased from 111.9 million in 2020-21 to 78.8 million in 2024-25, returning to pre-pandemic levels.
Factors Contributing to the Decline
- Imposed 60% cap on MGNREGA labour-budget spending in the first half of the financial year.
- Rain in October made many work sites inaccessible, disrupting participation.
However, these factors don't fully account for the decline, indicating a potential structural shift in rural employment.
Labour Market Data
The latest NSO data under the Periodic Labour Force Survey (PLFS) shows a decrease in rural joblessness:
- Rural unemployment rate declined to 4.4% in October from 4.9% in June.
- Rural consumption expanded 7.7% in Q2 of 2025-26, the fastest in 17 quarters.
Improvement Drivers
- Stronger real wages in both agricultural and non-agricultural work.
- Increased sales of tractors and fertilizers, healthy farm credit growth, and better rainfall distribution.
Urban Labour Market Trends
Urban areas show signs of stress:
- Urban unemployment rate increased to 7% in October from 6.8% in September.
This may indicate a movement of workers from rural to urban areas as rural opportunities stabilize.
Policy Recommendations
- Focus on improving rural infrastructure and connectivity.
- Implement targeted skilling programs to enhance non-farm employment.
- Expand credit access and market linkages for micro and small enterprises.
- Use MGNREGA as a safety net during lean seasons without fostering dependency.
- The notification of the four labour Codes is expected to aid in creating non-farm jobs over the medium term.
