Explained : Why Government Replaced MGNREGA Instead Of Reforming It and Its Impact

The replacement of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) with the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G) has sparked an intense debate over rural employment policy. While the government highlights an expansion of guaranteed workdays from 100 to 125, critics remain unconvinced.

At the heart of the controversy lies a fundamental question: was replacing MGNREGA necessary at all? Could the same objectives not have been achieved through amendments to an existing framework?

The scepticism is not without merit. MGNREGA, despite its many flaws, remains one of India’s most recognisable social welfare programmes. Yet the defence of its continuity often glosses over a less comfortable reality: the scheme consistently failed to meet its own promises.

Since its inception, average employment under MGNREGA has hovered around 40 to 50 days per household, barely half of the legally guaranteed entitlement. If a scheme struggles to deliver 100 days of work in practice, the logic of raising that ceiling to 125 under a new framework naturally invites scrutiny.

It is therefore reasonable to question whether VB-G RAM G represents meaningful reform or merely a change in form that risks repeating old failures under a new name.

One of the major criticisms targets the renaming of the programme. This is perhaps the weakest argument in the debate. The opposition could have raised far more substantive objections, though the government too can be questioned for taking a step that was largely avoidable.

That said, the acronym “MGNREGA” itself has long been unwieldy. Across states, it has been colloquially shortened or replaced with local terms, some neutral, some deeply demeaning. One such example I came across was the term ‘housewife’ used for MGNREGA workers in a village of Rajasthan.

The government’s reasoning appears to be that “G RAM G” may resonate more naturally in rural India, though only time will reveal whether that assumption holds true. Beyond optics, however, the debate over nomenclature risks diverting attention from deeper structural shifts embedded in the new law.

The Core Shift: Cost-Sharing and Accountability

The most consequential change under VB-G RAM G lies in the restructuring of cost-sharing between the Centre and the states. The revised 60:40 ratio has been presented as a move towards greater state accountability. It is argued that this imposes an additional fiscal burden on states already struggling with tight budgets.

This concern deserves serious examination. If the 60:40 formula had been fully operational in FY25, states would have faced an estimated additional burden of around ₹31,000 crore, roughly 0.54% of total state expenditure.

In absolute terms, this is not insignificant. However, it must be contextualised within the broader fiscal position of states. Over the last few years, most states have made progress towards fiscal consolidation. Aggregate state fiscal deficits have remained within the 3% of GDP threshold, and revenue deficits have been contained at 0.2% of GDP in 2022–23 and 2023–24, according to the Reserve Bank of India in 2024.

The deeper issue is not merely affordability, but willingness. Higher state contribution theoretically encourages better planning and discourages wasteful expenditure. Under MGNREGA, the infamous “dig and refill” phenomenon, where trenches were dug and refilled repeatedly with no productive outcome, was not limited to a single political dispensation or region.

It occurred across states, regardless of party alignment, suggesting a systemic incentive problem rather than isolated administrative failure.

Yet increased state contribution does not automatically translate into better outcomes. Without parallel improvements in planning capacity, monitoring, and technical evaluation, higher costs may simply coexist with inefficiency.

The shift rests on the assumption that greater fiscal responsibility will prompt behavioural change at the state level. Notably, even then Finance Minister P. Chidambaram had argued for a similar approach during his tenure, recognising it early on as a fiscally prudent course of action.

Gram Sabhas and the Question of Decentralisation

Another major concern is that the new framework weakens Gram Sabhas by aligning works with a centrally defined “National Rural Infrastructure Stack”. Under MGNREGA, Gram Sabhas had significant autonomy in identifying projects.

The new Bill requires local plans to align with national templates and priorities, which critics see as central overreach.

This touches on a long-standing tension in Indian governance: decentralisation versus capacity. While local decision-making is desirable, it assumes a level of technical competence that many Gram Sabhas currently lack.

In practice, decentralisation under MGNREGA often meant replication of low-skill, low-impact works rather than genuine grassroots planning.

VB-G RAM G introduces the mechanism of Viksit Gram Panchayat Plans, which are aggregated upwards through administrative layers before being integrated into a national framework. This preserves a degree of local input while imposing structural coherence.

However, coherence alone does not equal empowerment. The Bill does little to address the underlying issue of technical capacity at the Gram Panchayat level.

Therefore, while the Bill cannot be said to weaken Gram Sabhas, it certainly does little to strengthen them. The government would be better served by investing in greater technical capacity and professional expertise at the Gram Panchayat level.

The 60-Day Pause: Correction or Constraint?

Another criticism is that the mandatory 60-day pause in work during peak agricultural seasons has been framed as an unnecessary restriction on employment. Yet this provision addresses a distortion that has plagued rural labour markets for years.

MGNREGA often competed directly with agriculture, drawing labour away during sowing and harvesting periods and pushing up farm wage costs.

This was not a new concern. At the time, the Union Agriculture Minister Sharad Pawar had written on multiple occasions to the then Rural Development Minister Jairam Ramesh, arguing that MGNREGA should observe an annual off-period of at least three months.

From this perspective, the pause appears less ideological and more corrective.

Demand-Driven Versus Supply-Driven Employment

Perhaps the most ideologically charged argument is that VB-G RAM G shifts the scheme from a demand-driven entitlement to a supply-driven framework. Under MGNREGA, workers could demand employment as a right. Under the new model, work is provided based on availability and planning.

Technically, this does dilute the original rights-based architecture. Practically, however, the extent of dilution may be overstated. In a politically competitive and populist environment, governments regardless of party face strong incentives to ensure employment generation.

Denying work at scale carries electoral costs.

The more substantive issue is not access, but relevance. Under MGNREGA, the imperative to respond to demand often resulted in artificial work creation. Projects were designed to absorb labour rather than meet development needs, leading to wastage of fiscal and human resources.

VB-G RAM G attempts to address this by integrating planning with national infrastructure priorities, including convergence with broader logistics and infrastructure frameworks. In theory, this could reduce fragmentation and repetition.

In practice, it introduces new layers of coordination that may improve execution.

Why Replacement, Not Amendment?

The final and perhaps most important question is why the government chose replacement over amendment. On the surface, many reforms introduced under VB-G RAM G could have been layered onto MGNREGA.

However, the government is attempting to alter the philosophical foundation of rural employment policy itself.

MGNREGA was rooted in a welfarist, rights-based approach. VB-G RAM G seeks to blend welfare with productivity, entitlement with planning, and employment with asset creation.

VB-G RAM G seeks to move rural employment from pure welfare towards welfare integrated with capital expenditure.

The underlying intent behind measures such as revised cost-sharing and a supply-driven framework appears to be a shift from a purely welfarist programme towards one that also functions as a productive capital expenditure instrument. VB-G RAM G attempts to recalibrate this balance between welfare expenditure and capital expenditure.

Seen in that light, the government has opted for replacement rather than incremental amendment.

There is, inevitably, a political dimension as well. MGNREGA remains one of the last enduring legacies of the UPA, which partly explains the sharp opposition from leaders of the Indian National Congress to VB-G RAM G.

Setting politics aside, the real test for the new scheme lies in implementation: whether it can achieve its stated objective of productive asset creation, or whether it risks reproducing the corruption, inefficiency, and low-quality outcomes that plagued MGNREGA.

That assessment can only be made over time. If it succeeds in aligning employment generation with the durable development it aims for, it may justify the disruption it has caused.