What Happened
- The year in which the NDA government passed legislation to replace MGNREGA saw an 8% decline in the number of families that availed employment under the scheme — 53.2 million (5.32 crore) households received MGNREGA employment in FY2025-26, the lowest figure in six years.
- Individual participation also fell sharply: workers employed declined from 8.75 crore (2022-23) to 8.34 crore (2023-24) to 7.88 crore (2024-25) to roughly 6.37 crore so far in 2025-26 — the lowest since the COVID-19 year of 2020-21.
- The Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act (VB-GRAMG Act), 2025 was passed by Parliament in December 2025, formally repealing MGNREGA and replacing it with a new framework that increases guaranteed days to 125 per household but shifts 40% of wage costs to state governments.
- Critics argue the decline in utilisation reflects both reduced budgetary allocations and the transitional uncertainty created by the new law, while the government contends falling demand signals rural prosperity and the growing effectiveness of direct benefit transfers and other livelihood schemes.
- Activists and opposition parties have condemned the repeal of MGNREGA as dismantling a constitutional entitlement, warning of "deep rural distress" if the new law's cost-sharing structure is not adequately funded.
Static Topic Bridges
MGNREGA — Architecture, Legal Basis, and Historical Significance
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005, was enacted on August 23, 2005, under the UPA-I government. It came into effect in February 2006, beginning in 200 most backward districts before scaling nationally. It was the world's largest workfare programme — a demand-driven, rights-based framework that converted the "right to work" (Article 41, DPSP) from a non-justiciable aspiration into a legal entitlement.
Under MGNREGA, any rural household whose adult members volunteer for unskilled manual work is entitled to at least 100 days of wage employment per financial year. If work is not provided within 15 days of application, the government must pay an unemployment allowance. Wages are paid at state-specific MGNREGA wage rates (linked to CPI-AL), with a 60:40 wage-to-material expenditure ratio. The entire unskilled wage bill was funded 100% by the Centre; states shared material and skilled wage costs.
- Legal authority: MGNREGA, 2005 (Gazette Notification, August 23, 2005); implemented under Ministry of Rural Development
- Constitutional basis: Article 41 (DPSP — right to work), Article 43 (living wage)
- Coverage: ~250–300 million rural poor at peak; ~5.32 crore households in FY26
- Cumulative impact (2006-2025): ₹1,10,000 crore+ in direct wage payments; 1,200 crore+ person-days generated
- Permissible works: water conservation, irrigation, land development, rural roads, drought proofing, social forestry — 261 permissible works as of 2021
- Wage-material ratio: minimum 60:40 (wages must be at least 60% of total expenditure)
- MGNREGA Ombudsman: grievance redressal mechanism; Social Audit mandatory under the Act — unique in Indian governance
Connection to this news: The sharp decline in MGNREGA utilisation in the year the law was replaced raises legitimate questions about whether reduced access (through administrative attrition or budget squeezes) — rather than reduced need — explains falling numbers.
VB-GRAMG Act 2025 — Key Changes and Controversies
The Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 was passed by Lok Sabha on December 16, 2025, and received Presidential assent. It formally repeals MGNREGA and restructures rural wage employment under the "Viksit Bharat" (Developed India by 2047) framework.
Headline changes include: increasing guaranteed days from 100 to 125 per household annually; introducing weekly wage payments (replacing the 15-day cycle); linking works to climate resilience and infrastructure; and pausing work for 60 days during peak agricultural seasons (notified by state governments).
The most contested change is the funding model: wages were 100% centrally funded under MGNREGA; under VB-GRAMG, states must bear 40% of wage costs (60:40 Centre-State split). For poorer states with limited fiscal capacity, this is seen as a potential threat to scheme implementation. A "normative allocation" mechanism (Section 4(5)) allows the Centre to cap its contribution to each state based on "objective parameters" yet to be prescribed — meaning any demand above the cap falls on state budgets.
- Passed: Lok Sabha, December 16, 2025; Presidential assent received
- Guaranteed employment: 125 days/household/year (up from 100 under MGNREGA)
- Funding: 60:40 Centre-State (wages); special ratios for northeastern states and UTs; 100% central under MGNREGA for unskilled wages
- Agricultural pause: 60 days of no work during peak season (state-notified) — critics argue this makes the 125-day guarantee illusory in practice
- Demand-driven mechanism: weakened — the VB-GRAMG is more supply-driven, with normative allocations replacing unconditional entitlement
- Weekly wage payments: improvement over 15-day MGNREGA cycle
- Opposition stance: CPIM, Congress, and others called it "anti-poor," arguing cost-shifting to states will hurt the rural poor in low-income states
Connection to this news: The 8% decline in MGNREGA-availing families in the very year of the transition suggests the policy shift may be compressing access even before the new law is fully operational.
Rural Distress Indicators and the Political Economy of Workfare
Rural wage employment schemes serve a dual function: they provide income support during agricultural lean seasons and act as an automatic stabiliser during economic downturns. The utilisation pattern of MGNREGA has historically tracked rural distress — spikes during droughts (2015-16, 2019-20) and during COVID-19 (2020-21 recorded ~7.55 crore households). Post-COVID normalisation was expected to reduce demand; however, demand remained elevated through 2023-24 (8.34 crore workers), suggesting continued rural distress.
- MGNREGA as distress indicator: utilisation peaks during drought and economic shocks; 2020-21 COVID year saw record expenditure (₹1.11 lakh crore)
- FY26 decline drivers (disputed): government cites rural prosperity, Lakhpati Didi scheme success, and improved agriculture; critics cite delayed wage payments (a persistent MGNREGA failure), budget cuts, and administrative obstacles
- Budget allocation trend: MGNREGA budget was ₹86,000 crore (BE) for FY26 — supplementary demands regularly exceed initial allocation in years of high utilisation
- Rural unemployment rate (PLFS, 2023-24): 5.9% (rural males); under-employment and disguised unemployment remain structurally high
- Agricultural labour wages: MGNREGA has put upward pressure on agricultural wages in many states — its removal or weakening could suppress rural wage floors
Connection to this news: The simultaneous decline in utilisation and passage of replacement legislation in FY26 creates an important data point for evaluating whether India's rural safety net is contracting at a time when rural vulnerability persists.
Key Facts & Data
- MGNREGA households in FY26: 53.2 million (5.32 crore) — lowest in six years; 8% decline year-on-year
- Workers employed: 8.75 cr (FY23) → 8.34 cr (FY24) → 7.88 cr (FY25) → ~6.37 cr (FY26 provisional)
- VB-GRAMG Act, 2025: passed Lok Sabha December 16, 2025; repeals MGNREGA
- Guaranteed days: 125/household/year under VB-GRAMG (up from 100 under MGNREGA)
- Funding shift: 100% central (MGNREGA wages) → 60:40 Centre-State (VB-GRAMG wages)
- Agricultural work pause: 60 days/year during peak season under VB-GRAMG
- MGNREGA enacted: August 23, 2005; implemented from February 2006
- Constitutional basis: Article 41 (DPSP, right to work)
- Cumulative wage disbursement (2006-2025): ₹1,10,000+ crore directly to rural households