The Indian government is planning to increase minimum wages under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) by between 17 percent and 30 percent from the current IRs 100 a day. It will cost the government an additional IRs 3,500 crore (total budget allocation for this fiscal year is IRs 40,100 crore) in the current fiscal year itself. Good for the workers, but bad for local employers who employ low-skilled laborers, and for food prices and inflation. NREGA (renamed MGNREGA in FY 2010/11) is a flagship rural employment generation and livelihood program of the UPA government in India. This social welfare program guarantees one hundred days of employment per year at the prevailing minimum wage rate for unskilled labor. When NREGA was implemented in 2006, eleven states saw a rise in minimum wages. The new revised wages, to be adjusted with CPI, is set to increase wages in twenty states.
Earlier, the per day wages was set at IRs 100. The estimates below are based on IRs 100 per day wage. With budget amounting to mere 0.67 percent of GDP, the program provided employment to 53 million households and created around two million productive assets in fiscal year 2009-2010 (see Table 1 and 2). Meanwhile, employment given to women accounts for around 48 percent of the total persondays of employment. Similarly, employment given to backward groups (scheduled tribes and scheduled castes)—also the most vulnerable groups to income and climate related shocks—account for about 51 percent of the total persondays of employment created in fiscal year 2009-2010.
| Table 1: NREGA budget | ||||
| Fiscal year | 2006-07 | 2007-08 | 2008-09* | 2009-10** |
| Number of rural districts | 200 | 330 | 615 | 615 |
| NREGA/GDP | 0.27 | 0.25 | 0.56 | 0.67 |
| NREGA/Expenditure | 1.94 | 1.68 | 3.33 | 3.83 |
| NREGA/Revenue | 2.60 | 2.21 | 5.34 | 6.36 |
| Sources: Computed using data from Union Budgets, Economic Surveys and NREGA website; **budget estimate; *revised budget estimate | ||||
| Table 2: Employment under NREGA (million) | ||||
| Fiscal year | 2006-07 | 2007-08 | 2008-09 | 2009-10 |
| Households provided employment | 21 | 34 | 45 | 53 |
| Total persondays | 905 | 1437 | 2163 | 2826 |
| SCs persondays | 230 | 394 | 634 | 863 |
| STs persondays | 330 | 421 | 550 | 586 |
| Women persondays | 368 | 611 | 1036 | 1374 |
| Others persondays | 346 | 622 | 980 | 1377 |
