In a first, Centre caps MGNREGS spend at 60% for first six months of FY 2025-26

The Finance Ministry introduced the MEP/QEP in 2017 to help ministries manage cash flow and avoid unnecessary borrowing. MGNREGS remained outside its scope until now, with the Rural Development Ministry arguing that the scheme’s demand-driven nature made fixed spending caps unworkable. But at the start of the 2025–26 financial year, the Finance Ministry is learnt to have directed the MoRD to include MGNREGS under the MEP/QEP framework as well.

It is learnt that the Rural Development Ministry (MoRD) had submitted its MEP/QEP for MGNREGS to the Budget Division of the Finance Ministry, proposing a higher spending limit for the first two quarters of 2025–26. However, the Finance Ministry did not agree.

After multiple rounds of communication between the two ministries, the Finance Ministry informed MoRD on May 29 that it could spend up to 60 per cent of MGNREGS’s annual outlay—Rs 86,000 crore—in the first half of the financial year, “considering the urgent need of expenditure to be incurred during [the] first half.” This means that only Rs 51,600 crore will be available for the scheme until the end of September.

Although a 60 per cent spending cap may not have made a difference in most years—given that first-half spending has typically ranged between 50 and 60 per cent (53.5 per cent in 2024–25, 60.51 per cent in 2023–24, 54.29 per cent in 2022–23, 60.83 per cent in 2021–22, and 53.79 per cent in 2020–21)—officials told The Indian Express that it could impact employment generation under the rural job guarantee scheme this year, due to a significant carryover of pending liabilities worth Rs 21,000 crore from the previous financial year.

According to government sources, a significant portion of this year’s MGNREGS allocation will go towards clearing pending liabilities from the previous financial year, limiting the scope for generating the targeted number of persondays. The term “persondays” refers to the total number of days of work performed by individuals under the scheme.

For 2025–26, the Rural Development Ministry has approved a labour budget of 198.86 crore persondays. Of this, 67.11 per cent—or 133.45 crore persondays — are projected to be created in the first half of the financial year. As of June 8, 2025, the Centre has released Rs 24,485 crore, which is 28.47 per cent of MGNREGS’s total allocation of Rs 86,000 crore for the year.

Finance Ministry officials are also learnt to have raised questions about the pending liabilities from the previous year. Citing provisions of the MGNREGA Act, 2005—which mandate that wages must be paid within 15 days—they questioned how dues of over Rs 21,000 crore were still pending for the last fortnight (March 15–31) of the 2024–25 financial year.

Launched in 200 of the country’s most backward rural districts in 2006–07, MGNREGS was expanded to 130 more districts in 2007–08 and rolled out nationwide in 2008–09. The scheme saw a surge in demand during 2020–21, when a record 7.55 crore rural families accessed work under it amid the Covid-19 outbreak. It became a key safety net for migrant workers returning to their villages during the lockdown. Since then, the number of families employed under the scheme has steadily declined—7.25 crore in 2021–22, 6.18 crore in 2022–23, 5.99 crore in 2023–24, and 5.79 crore in 2024–25. These figures do not include beneficiaries from West Bengal, where the scheme has been suspended since March 2022.