As a new law takes the place of the Mahatma Gandhi National Rural EmploymentGuarantee Act (MGNREGA), concerns have been raised about a possible erosion of rights-based workwhile signalling a shift to more explicitly budgeted allocations, explain Saumitra Bhaduri and KR Shanmugam
New law in place of MGNREGA
Parliament has passed a new law, which will replace the MGNREGA. The Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB – G RAM G) Bill, 2025. The Bill has removed the name “Mahatma Gandhi” and aligned the programme with the “Viksit Bharat @2047” vision. It proposes to raise the employment guarantee from 100 to 125 days per household per year and reorienting work towards infrastructure creation and climate-resilient assets. It signals a shift to more explicitly budgeted annual allocations, potentially departing from MGNREGA’s traditional demand-driven financing model.
In contrast to MGNREGA, under which the Centre covered all unskilled wage costs and most material expenses, the G RAM G Bill converts the programme into a centrally-sponsored scheme (CSS), and introduces cost-sharing of 90:10 for Northeastern and Himalayan states, 60:40 for others, and full central funding for Union Territories without legislatures. A notable feature is the agricultural work moratorium, which allows states to pause the scheme for up to 60 days during peak farm seasons, helping shift labour to agriculture, ease shortages, and contain wage pressures during sowing/harvest.
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Shortcomings in G RAM G and what is at stake
The central concern is the possible erosion of MGNREGA’s rights-based character; budgetary limits could reduce a legal right to a rationed service. As a CSS, the new mission may require states to bear 40-50% of costs, which will increase their fiscal burden, potentially crowd out other essential public spending, and exacerbate inter-state fiscal disparities. By prioritising works like water management, soil conservation, and rural connectivity, the framework could improve the durability, quality, and long-term productivity of assets, increasing rural resilience to climate shocks. MGNREGA is a significant innovation in social policy. The reforms offer an opportunity to improve it. A phased, integrated approach is essential: MGNREGA must remain a constitutional right, while G RAM G serves as a pathway to skilled and sustainable livelihoods. It requires assured central funding, requisite fiscal space for states, and a consultative Centre-state framework aligned with development goals.
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Scale and success of MGNREGA
According to government data, in 2024-25, the MGNREGA generated 291 crore person-days of employment, with women accounting for 58-59%, the highest share in over a decade. More than 15 crore job cards have been issued since inception, though average employment per household remains below 50 days nationally. The FY26 Budget allocated around Rs 86,000 crore to MGNREGA, among the highest outside the pandemic years, reflecting sustained rural demand and its role as a key income stabiliser. The scheme has also produced over eight crore rural assets-60% of it in water conservation, drought proofing, and land development. In water-scarce areas, research has shown that MGNREGA has increased the recharge rate of groundwater and crop intensity. It has also introduced the culture of government transactions being transparent. MGNREGA has proven particularly valuable as a counter-cyclical and crisis-response instrument. Central expenditure rose sharply from about Rs 11,300 crore in 2006-07 to over Rs 1.1 lakh crore in the pandemic year of 2020-21.
Challenges and structural issues
MGNREGA has been grappling with operational challenges. Delayed wages have been the most concerning issue, with state data revealing that in some years, the 15-day deadline for making payments had been violated by 30-40% on average. Administrative efficiency has been very uneven, with disparities in states linked to the quality of planning, technical management, and assets. Performance varies sharply: while states like Chhattisgarh have achieved close to 100% coverage of households receiving 100 days of work, states like Bihar have recorded as low as 0.17%, reflecting administrative capacity constraints and uneven political commitment. Fund availability remains inconsistent, with rising pending liabilities exceeding annual allocations. Although corruption has declined over the years, aided by digitisation and social audits, problems such as inflated muster rolls, delayed work measurement, and incomplete assets persist in certain regions. Wage rates, often below prevailing state minimum wages, also remain a concern. However, these failures reflect poor governance and capacity constraints rather than flaws in the core idea of work guarantee.
JAM solution and digitalisation
The JAM (Jan Dhan, Aadhaar, mobile) trinity brought about an institutional shift. At present, more than 95% Aadhaar-linked job cards are in possession of active workers, and disbursements are made mostly through Direct Benefit Transfer schemes, a facility enabled through the Aadhar Payment Bridge System. It diminished some leakages, improved audit trails, and brought financial inclusion, especially for women. However, digitalisation has also introduced new challenges. Failures in Aadhaar authentication, bank mapping, or technological problems have caused people to be denied payments.
The writers are respectively professor and former director, Madras School of Economics
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