Revisiting NREGA Wages: Addressing Disparities and Inflation
Kartavya Desk Staff
Syllabus: Government schemes
Source: IE
Context: The Parliamentary Standing Committee on Rural Development has strongly recommended a revision and uniformity in MGNREGA wages, citing rising cost of living and inadequate inflation indexation.
About NREGA and Its Importance:
• Legal Entitlement to Employment: The Mahatma Gandhi National Rural Employment Guarantee Act (2005) ensures 100 days of guaranteed wage employment to rural households annually.
• Largest Employment Guarantee Programme Globally: With over 25 crore registered workers, MGNREGA is the world’s most expansive public employment scheme.
• Poverty Alleviation Tool: NREGA acts as a safety net for the rural poor, especially during crises like the COVID-19 pandemic, when rural joblessness spiked.
• Strengthening Rural Infrastructure: It promotes natural resource management (e.g., water conservation, afforestation) while providing employment.
• Wage Growth Multiplier: Studies (Jean Drèze, Raghav Gaiha) show that NREGA has raised overall rural wages and improved bargaining power for casual workers.
How NREGA wage rates are decided?
• Section 6(1): Central government can notify independent wage rates. The Centre can set NREGA wages regardless of the state’s minimum wage under the Minimum Wages Act.
• Section 6(2): State minimum agricultural wages apply in absence of central notification This was the default mechanism between 2005–2009.
• Historical Cap Introduced in 2009: To reduce fiscal burden, NREGA wages were capped at ₹100 despite rising state wages.
• Indexation to CPI-AL since 2011 (base year 2009): The wage is revised annually based on the CPI for Agricultural Labourers (CPI-AL).
• States may top up wages over the Centre’s notified rate: A few states voluntarily pay the gap between the Centre’s rate and their minimum wage.
Key Issues with NREGA Wage Rates:
• Widening Gap from State Minimum Wages: In many states, NREGA wages are significantly below the legally mandated minimum wage.
E.g. In FY 2025–26, Sikkim shows a gap of ₹241 between NREGA and minimum wages.
• Flawed Inflation Indexation: Using CPI-AL does not accurately capture rising rural living costs compared to CPI-R.
E.g. Mahendra Dev and Nagesh Singh Committees recommended shifting to CPI-Rural for better accuracy.
• Large Inter-State Disparities in Wages: Workers in different states earn vastly different wages for the same NREGA work.
E.g. In FY 2025–26, Nagaland pays ₹234, while Haryana pays ₹374—a gap of ₹140.
• Base Year Remains 2009: Wage calculations still use outdated price data, undervaluing labour in current economic conditions.
E.g. If updated to 2018 or 2022, wages could align better with real rural cost of living.
• Delayed Wage Payments: Funds often arrive late, causing economic hardship and workforce dropouts.
E.g. As of February 2025, ₹12,219 crore in wage liabilities remained unpaid.
Way Forward:
• Link Wages to Minimum Wages of States: Align NREGA wages with the Minimum Wages Act to comply with legal and constitutional mandates.
E.g. Supreme Court in *Sanjit Roy vs State of Rajasthan* (1983) held that paying less than minimum wage is forced labour.
• Switch to CPI-R with Updated Base Year: Ensure indexation reflects actual price trends and consumption patterns of all rural workers.
E.g. CPI-R includes rural non-agricultural workers, offering broader coverage than CPI-AL.
• Adopt a National Floor Wage Policy: Create a wage floor (e.g., ₹375 or revised for inflation) for national parity and justice.
E.g. Recommended by Anoop Satpathy Committee to ensure consistency across states.
• Ensure Timely and Transparent Payments: Fix digital delays and payment bottlenecks through better fund flows and grievance redressal.
E.g. Wage arrears of ₹12,219 crore in 2025 have crippled scheme implementation in several states.
• Implement Uniform Wage Policy: Standardise wages nationally since the Centre funds the programme; this avoids unjust disparities.
E.g. Standing Committee (2025) called for one wage rate across all states to ensure fairness.
Conclusion:
The NREGA was envisioned as a dignity-driven social security programme. However, persistent wage discrepancies, inflation misalignment, and payment delays continue to undermine its core objectives. Ensuring fair, timely, and uniform wages is not just an economic necessity but also a constitutional obligation.
• “Economic growth in the recent past has been led by increase in labour productivity.” Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labour productivity.