The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was born out of a powerful idea: that the Indian state has a responsibility to guarantee livelihood security to its poorest citizens. Nearly two decades later, the spirit of inclusive development that animated its passage remains relevant. Yet, the administrative and fiscal machinery translating this spirit into reality shows clear signs of strain. A realistic assessment of both MGNREGA’s achievements and its failures is essential—not only to repair the programme but also to ensure that its proposed successor, VB-GRAM G, does not replicate the same structural flaws.
Why MGNREGA Was a Break from the Past
MGNREGA’s most distinctive contribution lies in its universal, self-targeting design. Any rural household willing to undertake manual labour is entitled to work, irrespective of caste, income, or political connections. This sharply reduced the scope for local elites to control access, a common problem in earlier poverty-alleviation schemes.
Over time, the programme emerged as a crucial safety net. It provided income support during agricultural lean seasons, expanded employment opportunities for women, and absorbed older workers who often struggle to find alternative jobs. Empirical studies also indicate that MGNREGA helped push up rural wages by setting a floor below which labour could not be easily exploited.
Uneven Outcomes Across States
Despite its universal design, MGNREGA outcomes have diverged sharply across states. In 2011–12, generated around 3.6 days of work per rural resident. By 2023–24, this rose to 11.3 days. In contrast, stagnated at around two days per rural resident over the same period.
This divergence is troubling because it runs counter to the logic of universal schemes. Uttar Pradesh has a significantly poorer rural population, with monthly per capita expenditure far below that of Kerala. A programme meant to be more inclusive of the poor has, paradoxically, delivered more in richer and administratively stronger states.
Chronic Underfunding at the Core
A major reason behind these disparities is persistent underfunding. Since its inception, neither UPA nor NDA governments have allocated resources commensurate with the legal guarantee embedded in MGNREGA. Even a modest assumption of 50 days of work per household at prevailing wage rates would require over ₹2.1 lakh crore annually in wages alone.
In reality, except during the pandemic years, central allocations rarely crossed ₹86,000 crore. As funds dried up—especially in the latter half of financial years—material payments were delayed, forcing states to advance their own resources. This systemically favoured fiscally stronger states while constraining poorer ones.
Administrative Capacity and Distorted Incentives
State-level governance capacity further shaped outcomes. Kerala managed to distribute employment evenly through the year, ensuring steady income support. In contrast, nearly 40% of MGNREGA employment in Uttar Pradesh was exhausted in the first quarter, leaving households vulnerable later.
The integration of MGNREGA with other infrastructure schemes added another layer of distortion. While convergence allowed labour costs to be met through MGNREGA and material costs through other schemes, it also created perverse incentives. In some relatively prosperous districts, officials were pressured to deploy MGNREGA even where local wages were higher and genuine demand was low, sometimes enabling collusion with contractors.
The Shift Towards VB-GRAM G
VB-GRAM G marks a quiet but significant departure from MGNREGA’s universal entitlement framework towards targeted and normative allocations. In theory, prioritising poorer states and districts could address regional inequality. In practice, however, the revised Centre–State funding ratio—from 90:10 to 60:40 for most states—poses serious challenges.
Poorer states with limited fiscal space may struggle to mobilise their share, potentially reducing their access to funds precisely when need is greatest. As state finances tighten further, this shift risks deepening, rather than correcting, inter-state disparities.
What Needs Recalibration
The core lesson from MGNREGA’s experience is that a legal right without adequate funding becomes hollow. The right to employment remains a morally compelling idea, but it demands sustained political and fiscal commitment. Underfunding has not only weakened delivery but also distorted incentives, undermining the programme’s original purpose.
A credible reform agenda must distinguish between what has worked—universal access, self-targeting, and wage support—and what requires correction, particularly financing mechanisms and administrative accountability.
What to Note for Prelims?
- MGNREGA is a demand-driven, rights-based employment programme.
- It relies on self-targeting rather than beneficiary identification.
- Funding is shared between Centre and States.
- VB-GRAM G proposes a shift towards targeted allocation.
What to Note for Mains?
- Assessment of MGNREGA as a social safety net.
- Causes and implications of inter-state disparities.
- Impact of underfunding on rights-based welfare schemes.
- Centre–State fiscal relations and their effect on welfare delivery.
