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India rebrands and expands rural employment guarantee
India has replaced its flagship rural jobs programme, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), with a new law that increases guaranteed workdays but shifts funding responsibilities to states. The move has sparked controversy over the scheme's future effectiveness.
Key changes under the new law
The newly enacted G RAM G law raises the annual employment guarantee from 100 to 125 days per rural household. It maintains the provision that workers denied jobs within 15 days receive an unemployment allowance. However, the funding model has been revised from a 90:10 federal-state split to a 60:40 ratio, increasing states' financial burden.
The central government retains control over state-wise allocations and the power to determine where and when the scheme applies. Despite these changes, the federal budget for the current financial year allocates $9.5 billion to the programme.
Government defends reforms as pro-poor
Federal Agriculture Minister Shivraj Singh Chouhan framed the reforms as a modernisation effort to enhance efficiency and reduce corruption. "This law stands firmly in favour of the poor, in support of progress, and in complete guarantee of employment for the workers," he stated.
The government argues that the increased workdays and structural adjustments will empower rural communities. However, critics warn that the new funding model could weaken the scheme's legal guarantees.
Critics warn of centralisation and reduced protections
Opposition parties, academics, and state governments have voiced concerns that the reforms dilute the scheme's legal entitlements. Development economist Jean Drèze described the changes as "the culmination of the long-standing drive for centralisation," adding that the scheme risks becoming discretionary rather than a guaranteed right.
"It is the reduction of employment guarantee to a discretionary scheme. A clause allows the federal government to decide where and when the scheme applies."
Jean Drèze, development economist
Drèze also questioned the practical impact of raising the workday ceiling to 125 days, noting that only 7% of rural households received the full 100 days of work in 2023-24. "When the ceiling is not binding, how does it help to raise it?" he asked.
International scholars rally in defence of original scheme
An open letter led by Olivier De Schutter, the UN Special Rapporteur on extreme poverty and human rights, warned that the new funding model could undermine the scheme's purpose. "The [MGNREGS] has captured the world's attention with its demonstrated achievements and innovative design. To dismantle it now would be a historic error," the letter stated.
Persistent challenges and structural concerns
Despite its successes, the scheme has faced long-standing issues, including underfunding and delayed wage payments. West Bengal's programme, for example, has seen funding freezes since 2022 due to alleged non-compliance with federal directives.
Economists Karthik Muralidharan, Paul Niehaus, and Sandip Sukhtankar found that the scheme boosted beneficiary households' earnings by 14% and reduced poverty by 26%. However, critics argue that it fails to address India's broader challenge: generating sufficient non-farm jobs to absorb rural labour.
Agriculture, which supports nearly half of India's rural population, contributes just 16% to GDP and has grown at only 3% annually since 2001-02, compared to 7% for the rest of the economy.
Debate over scheme's role in rural livelihoods
The government's Economic Survey 2023-24 questioned whether demand for the scheme truly reflects rural hardship. It noted that wealthier states like Tamil Nadu and Kerala received disproportionate funds relative to their share of the country's poor, suggesting administrative capacity plays a larger role than need.
Nitin Pai of the Takshashila Institution argued that the scheme acts as a temporary cushion but does little to improve long-term rural productivity. "With [the scheme] we're merely treating a serious underlying malaise with steroids," he said.
Meanwhile, a study by economists Maitreesh Ghatak, Mrinalini Jha, and Jitendra Singh found that India's recent rise in labour force participation, particularly among women, stems from economic distress rather than growth-driven job creation. The increase is concentrated in low-productivity, subsistence-level work.
Future of India's rural employment guarantee
The revamped scheme will continue to play a critical role in supporting hundreds of millions of rural Indians. However, its ability to deliver on its expanded promises remains uncertain amid funding shifts and broader structural challenges in India's rural economy.
