Dipak Kurmi
The Union Government’s move to replace the Mahatma Gandhi National Rural Employment Guarantee Act with the Viksit Bharat — Guarantee for Rozgar and Aajeevika Mission (Gramin), popularly referred to as VB-G Ram G, marks one of the most consequential shifts in India’s rural welfare architecture since 2005. Beyond the optics of renaming, the proposed legislation introduces structural changes that significantly alter the balance between social protection, labour rights and fiscal responsibility. While the government projects the new framework as a forward-looking reform aligned with the vision of Viksit Bharat @2047, several provisions suggest a departure from the foundational spirit of MGNREGA, which was rooted in unconditional employment security for rural households.
Introduced in 2005–06 by the United Progressive Alliance government, MGNREGA was conceived as a rights-based social security programme rather than a conventional poverty alleviation scheme. It guaranteed on-demand access to at least 100 days of wage employment per rural household, with an explicit legal obligation on the state to provide work or pay unemployment allowance. Although the Act also envisaged the creation of durable public assets and strengthening rural infrastructure, its core objective remained income support and livelihood security for unskilled rural workers. Over time, this emphasis on social protection came to define MGNREGA’s identity, sometimes inviting criticism for allegedly prioritising consumption smoothing over productivity gains.
Empirical evidence, however, has consistently challenged simplistic critiques of the programme. A landmark study published in 2023 by economists Karthik Muralidharan, Paul Niehaus and Sandip Sukhtankar demonstrates that when implemented efficiently, MGNREGA increases rural incomes by around 14 per cent and reduces poverty by 26 per cent. Crucially, the benefits extend beyond direct beneficiaries. By strengthening workers’ bargaining power, the scheme raises private-sector wages for unskilled labour, thereby influencing the broader rural labour market. The study also documents a spillover effect in the form of increased non-agricultural economic activity at the village level, driven by higher disposable incomes. Earlier research by Clément Imbert and John Papp in 2015 similarly found positive impacts on both participants and non-participants, reinforcing the view that MGNREGA functions as a macro-stabiliser in rural economies.
Against this backdrop, the VB-G Ram G Bill introduces a notable change by increasing the guaranteed employment from 100 to 125 person-days per household annually. On paper, this expansion appears to strengthen the rural safety net. Yet, this enhancement is accompanied by a critical caveat. Section 6 of Chapter 2 empowers state governments to notify peak agricultural periods of up to 60 days during which no work under the scheme will be provided. The underlying rationale is that labour demand during peak agricultural seasons reduces the need for public employment, allowing the scheme to focus on lean periods while easing administrative pressures on local institutions.
At an aggregate level, data lends some support to this logic. During the financial year 2024–25, the two leanest months accounted for less than 9 per cent of annual MGNREGA demand across Uttar Pradesh’s 75 districts. In Tamil Nadu, demand during the leanest months was even lower, averaging just 2.2 per cent across 37 districts. These figures suggest that rural households themselves tend to rely on MGNREGA primarily during specific periods, reinforcing the argument for seasonal targeting. Concentrating programme implementation in lean months could, in theory, improve efficiency without significantly reducing coverage.
However, aggregate averages obscure deep structural inequalities across districts and regions. Local labour markets are shaped by landholding patterns, caste hierarchies and historical power relations. In districts where land ownership is concentrated among a small elite, agricultural wages are often suppressed due to weak bargaining power among labourers. In such contexts, MGNREGA serves not merely as a fallback option but as a critical lever that disciplines local labour markets. Temporarily deactivating the scheme for 60 days can significantly weaken workers’ negotiating position, even if alternative employment technically exists. Evidence from Uttar Pradesh illustrates this risk. Districts such as Ayodhya, Sultanpur and Pratapgarh, all historically influenced by the colonial-era taluqdari system, record relatively high MGNREGA demand even during the leanest months, ranging from 13 to 14 per cent. A uniform seasonal suspension may therefore exacerbate local vulnerabilities rather than alleviate administrative burdens.
Equally significant is the shift in fiscal responsibility embedded in the new bill. Under MGNREGA, the central government bore the full cost of unskilled wages and 75 per cent of expenditure on materials and skilled or semi-skilled labour. Funding was demand-driven, with no state-wise allocation ceiling. States received funds based on actual demand for work, preserving the rights-based nature of the programme. VB-G Ram G departs from this model by introducing state-wise normative allocations, to be determined by the Centre using objective parameters. Any expenditure beyond this allocation would have to be financed by state governments themselves.
This change addresses a long-standing administrative challenge. States with stronger governance capacity have historically been better at utilising MGNREGA funds. In 2021–22, Tamil Nadu, despite being wealthier and less populous, utilised about 10 per cent of the national allocation, compared to Bihar’s 5.5 per cent and Uttar Pradesh’s 8.7 per cent. Centralised allocation may, in theory, promote more equitable distribution and prevent disproportionate utilisation by a few high-capacity states. Yet, the costs of this shift are substantial.
Under the new framework, most states will be required to contribute 40 per cent of the total programme cost, with limited exemptions for hilly and northeastern states. Combined with the obligation to fund expenditure exceeding central allocations, this represents a sharp increase in fiscal burden. Many states are already under strain from expanding welfare commitments and constrained revenue bases. Delayed wage payments, a chronic problem under MGNREGA even with higher central funding, risk becoming more frequent under VB-G Ram G. For poorer states facing unfavourable allocations, the possibility of fund shortages could undermine the scheme’s credibility and effectiveness.
The transition from MGNREGA to VB-G Ram G thus raises fundamental questions about the future of rural employment guarantees in India. While technological integration, digital monitoring and asset-focused planning may improve operational efficiency, the dilution of demand-driven funding and the introduction of seasonal exclusions alter the programme’s philosophical core. MGNREGA was as much about empowering workers through legal entitlement as it was about providing employment. Whether VB-G Ram G can preserve this ethos while adapting to contemporary governance priorities will depend not on nomenclature but on implementation choices.
As Parliament debates the bill, the challenge lies in ensuring that reform does not come at the cost of rights. The end of the MGNREGA era, if it indeed arrives, should not signify the erosion of rural workers’ economic security. Instead, the transition must reconcile fiscal prudence with social justice, recognising that employment guarantees are not merely welfare expenditures but investments in social stability and inclusive growth.
(The writer can be reached at dipakkurmiglpltd@gmail.com)
