Type: Schemes

Introduction

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), enacted in 2005, institutionalised a legal guarantee of 100 days of wage employment for rural households and became the backbone of India’s rural safety net. Over two decades, it generated billions of person-days of work and served as a counter-cyclical buffer during economic shocks. The proposed Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) or VB-G RAM G Bill seeks to replace this framework with a restructured employment model, redefining work guarantees, funding patterns, and state responsibilities. The transition reflects a deeper policy shift from entitlement-based welfare to administratively calibrated employment provisioning.

Why This Policy Shift Matters Now

The proposed overhaul comes at a time when official data reveals a steady decline in MGNREGA employment intensity despite rising budgetary allocations. Average days of employment per household fell from 51.52 days in 2020-21 to 35.52 days in 2025-26, while the total individuals who worked declined from 11.19 crore to 6.25 crore during the same period. This disconnect between expenditure and employment outcomes, coupled with persistent wage arrears and fiscal pressures on the Centre, has prompted a rethinking of the rural employment guarantee framework for the first time since its inception.

A Gradual Decline in Employment Outcomes

1. Average employment days: Declined from 51.52 (2020-21) to 35.52 (2025-26) per household.
2. Households completing 100 days: Reduced from 7.19 lakh to 4.74 lakh, indicating shrinking access to full entitlements.
3. Total individuals employed: Fell sharply from 11.19 crore to 6.25 crore, despite higher nominal allocations.
4. Average wage per person: Increased from ₹200.77 to ₹266.98, reflecting inflation adjustment rather than employment expansion.
5. Expenditure trend: Actual spending rose even as person-days stagnated, indicating cost pressures rather than job creation.

Redefining the Employment Guarantee

1. Household entitlement: Retains 100 days per household, but limits the scope for extended employment.
2. Individual eligibility: Introduces a cap of 125 days per individual, reducing flexibility for households with high dependency on wage labour.
3. Expanded discretionary employment: Allows additional 50 days only under specific conditions such as SC/ST households, disaster-hit areas, or drought-affected regions.
4. Shift in legal framing: Weakens the justiciable right to work by increasing administrative discretion in work allocation.

Restructuring the Funding Architecture

1. Centre’s responsibility: Continues to pay full unskilled wages.
2. States’ responsibility: Bear full material costs and a share of skilled wages, increasing fiscal pressure on state budgets.
3. Fiscal implications: States face higher upfront expenditure at a time of shrinking fiscal space and competing welfare commitments.
   1. The proposed framework shifts rural employment financing to a CSS-like structure, 60:40 for most states, 90:10 for NE and Himalayan states, and 100% Central funding for UTs without legislatures, marking a departure from MGNREGA’s earlier wage-centric Central funding.

Normative Allocation and Centralised Control

1. Normative allocation: Replaces demand-driven funding with pre-determined allocations decided by the Centre.
2. Objective criteria: Allocation based on labour budgets, past expenditure, and agricultural calendars.
3. Reduced state autonomy: States lose flexibility to respond to local employment demand spikes.
4. Administrative oversight: Central government gains greater control over expenditure approvals and fund releases.

Seasonal Pauses in Employment

1. Pause during peak agricultural seasons: Introduces a 60-day pause during sowing and harvesting periods.
2. Rationale: Ensures adequate agricultural labour availability.
3. Regional variation: Agricultural calendars differ across states, making uniform pauses administratively complex.
4. Impact: Reduces income smoothing for landless labourers dependent on continuous wage employment.

Shift in Governance and Panchayat Role

1. Gram Panchayat function: Continues as the primary implementing agency.
2. Planning structure: Integrates Panchayat plans into larger district and state labour plans.
3. Administrative layering: Adds oversight mechanisms, reducing Panchayat-level autonomy in work selection and execution.
4. Accountability shift: Moves from citizen-driven demand to bureaucratic allocation.

Budgetary Implications

1. FY 2025-26 allocation: ₹86,000 crore for rural employment.
2. Administrative and material costs: Estimated at ₹1.51 lakh crore including state share.
3. Cost pressures: Rising wages and material expenses increase fiscal stress without proportional employment gains.

Conclusion

The proposed overhaul of the rural employment framework marks a decisive shift from MGNREGA’s rights-based, demand-driven architecture to a fiscally calibrated, centrally managed scheme. By introducing normative allocations, CSS-style funding ratios, and tighter limits on employment days, the reform prioritises expenditure control and administrative predictability over employment assurance. While this may ease Central fiscal pressures, it risks weakening the role of rural employment as a social safety net, making the success of the new framework contingent on states’ fiscal capacity and the Centre’s willingness to balance efficiency with inclusion.

PYQ Relevance

[UPSC 2024] Examine the pattern and trend of public expenditure on social services in the post-reforms period in India. To what extent this has been in consonance with achieving the objective of inclusive growth?

Linkage: The question examines whether social-sector spending translates into inclusive growth. The article shows this gap through rising allocations but declining MGNREGA employment outcomes.