MGNREGA’s Promise, Its Fault Lines — and Why the Transition to VB-G RAM G Raises Hard Questions

The impulse that gave birth to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was rooted in an expansive idea of inclusive development: that the State must guarantee a basic floor of livelihood security, irrespective of caste, gender, or land ownership. Yet nearly two decades on, while the spirit of MGNREGA endures, the machinery that was meant to translate that spirit into outcomes is visibly clogged. Unless India confronts both what the programme achieved and where it faltered, the same flaws will shadow its proposed successor, VB-G RAM G.

Where MGNREGA genuinely worked

MGNREGA’s most enduring success lies in its design as a universal, self-targeted programme. By making manual work available on demand, irrespective of a household’s economic status, it largely bypassed local gatekeeping by political elites and contractors. This universality mattered: it allowed the poorest households to opt in without bureaucratic screening.

Over time, the scheme became a vital safety net — especially for women, older workers, and marginalised groups who struggled to access other forms of employment. A substantial body of research also credits MGNREGA with pushing up rural wages, particularly at the bottom of the labour market, by setting a wage floor that private employers had to contend with.

The widening gap between states

Yet beneath this success, deep structural cracks emerged, most starkly in inter-State outcomes. In 2011–12, Kerala generated about 3.6 days of MGNREGA work per rural resident. By 2023–24, this rose to 11.3 days. Uttar Pradesh, by contrast, stagnated — moving from 1.7 days to just 1.9 over the same period.

This divergence is troubling because it runs counter to the logic of universal welfare. UP’s rural population is far poorer, with monthly per capita expenditure at ₹3,481 in 2023–24, compared to Kerala’s ₹6,611. Universal schemes are meant to benefit poorer regions more, not less. That this did not happen signals systemic failure rather than local coincidence.

Chronic underfunding at the Centre

A central reason for this distortion is persistent underfunding. From its inception, neither the UPA nor the NDA fully financed MGNREGA’s legal promise. Even a modest assumption — 50 days of work per rural household at the current minimum wage of ₹234 — implies a wage bill exceeding ₹2.1 lakh crore. Yet, barring the pandemic years, annual Central allocations rarely crossed ₹86,000 crore.

This mismatch turned a statutory right into a rationed entitlement. As funds dried up midway through the financial year, material payments were delayed, forcing States to advance their own resources for works. Predictably, fiscally stronger States could do this; poorer States could not.

Governance capacity and unintended distortions

Administrative capacity compounded the problem. Kerala spread employment evenly across the year. Uttar Pradesh exhausted nearly 40% of its annual MGNREGA person-days in the first quarter, leaving little room for demand-driven employment later.

Many States also converged MGNREGA with infrastructure schemes: materials were paid for by other programmes, while MGNREGA covered labour costs. While efficient on paper, this created perverse incentives. District administrations were pressured to deploy MGNREGA even in relatively prosperous districts where wages exceeded MGNREGA rates and genuine demand was low. In such settings, contractor influence crept back in — undermining the very principle MGNREGA was designed to protect.

Why restructuring, not replacement, was needed

These distortions suggest that if MGNREGA is to function as a true safety net, especially for poorer States with weaker administrative capacity, it required structural repair rather than quiet dilution. That repair would have meant honest funding, clearer prioritisation of backward regions, and insulation from infrastructure-driven misuse.

Instead, the transition to VB-G RAM G marks a philosophical shift away from universality towards targeted, normative allocation. The question is whether this solves the core problem.

The VB-G RAM G dilemma: targeting without capacity

On paper, allocating more resources to poorer States and districts sounds sensible. But VB-G RAM G also alters the Centre–State funding ratio from 90:10 to 60:40 for most States. This change risks worsening inequality. States that most need employment support are also the least able to raise matching funds — especially as their fiscal space shrinks.

In effect, targeting without fiscal support may exclude the very households the redesign claims to prioritise.

The larger lesson from MGNREGA

MGNREGA’s experience offers a sobering lesson for welfare design. A right to employment is a powerful idea, but it cannot survive as an unfunded mandate. When resources fall short, universality erodes quietly, and exclusion creeps in through delays, rationing, and administrative discretion.

The challenge, then, is not merely to replace MGNREGA with a new acronym, but to decide what India truly values: symbolic rights or enforceable guarantees. Without wholehearted fiscal and administrative commitment, even the most compassionate welfare architecture risks becoming a right only in name — and one that fails precisely those it was meant to protect.