To increase job opportunities, the Union budget has proposed a massive push on capital expenditure. In this context, many expected that the government would allocate more funds to the MGNREGA program, a scheme that has been instrumental in protecting the rural economy during the most turbulent phases of the ongoing Pandemic. While this move by the government has been criticised in certain quarters, it may be too soon for anyone to pass a balanced judgement. Given the precarious times that the Indian economy has been through in the last two years it is essential that policy decisions be understood free of any biases. To understand this particular decision it is essential that we look into the context that may have informed the government’s decision. The initial phases of the pandemic saw an unprecedented phenomenon of reverse migration into rural areas. This put enormous pressure on the government to provide jobs in these areas as the demand for jobs crossed the 6 crore mark which later stabilised at the 4.5 crore mark which was still higher than the 3 crore mark that was seen in June 2019. To combat this the union government accommodated 1.1 lakh crore to job creation in the fiscal year of 20-21. This large investment was an obvious response to the realities of the pandemic as it was the highest ever allocation to this particular sector. The 1.1 lakh crore figure was reduced to 73,000 crore in the next fiscal year, a figure that has remained stagnant in the most recent union budget. As stated this stagnation has been subjected to criticism in some quarters, but, given the events of the last 2/2.5 years it is not difficult to understand the rationale of the government.
One of the most essential qualities necessary for any financial regime is to maintain a flexible framework that allows it to respond to ever changing financial realities. The government’s decision to emphasise capital creation through favourable policies in mostly urban areas highlights it’s intention to swiftly respond to the imbalances created by the onset of the pandemic. At the onset of the pandemic it was essential for the government to ensure the preservation of the unusually large rural workforce as a significant amount of these people had been forced to leave the cities due to the pandemic. This period also saw new challenges for more urban job creators as their ability to maintain a workable profit was gravely impacted. Therefore the decision of the government to provide the highest allocation to rural job creation was by no means going to be a lasting decision. By stabilising the investment in the rural job sector and by, simultaneously, focusing on increasing job and capital creation the government may be aiming to encourage the return of the workforce that left the cities. The efficacy of the decisions taken by the government will obviously depend on the events that transpire in the next few months, but it is essential that we recognise the eagerness of the decision makers to revitalise the Indian economy.