For nearly two decades, India’s rural employment framework rested on a powerful institutional promise: distress could be converted into a legally enforceable claim on the state. That promise, embedded in the Mahatma Gandhi National Rural Employment Guarantee Scheme, shaped not just incomes but the nature of the Indian welfare state itself. The replacement of this architecture by a new law marks a decisive shift — less visible in headlines, but profound in its implications.
MGNREGS as an economic and institutional guarantee
The “” (MGNREGS) was distinctive because it inverted the usual welfare logic. Rural households did not wait for administrative discretion; they could demand up to 100 days of work, and the state carried a time-bound obligation to provide it or pay unemployment allowance.
This rights-based asymmetry gave MGNREGS its insurance-like character. During droughts, floods, pandemics, or farm distress, employment expanded automatically. In FY 2024–25 alone, the programme generated about 2.9 billion person-days of work, with women accounting for over 58% of beneficiaries — underscoring its role in stabilising household incomes at the bottom of the labour market.
The arrival of VB–G RAM G and the promise of reform
The “” replaces MGNREGS with a redesigned framework. The government has framed it as modernisation: expanding guaranteed employment from 100 to 125 days, prioritising durable assets, strengthening monitoring, and aligning works with development planning.
Yet, beneath these changes lies a philosophical shift — from managing uncertainty to exercising control. While the entitlement has increased on paper, the binding constraint historically has never been the statutory ceiling. In practice, households received just over 50 days of work on average in 2024–25, much like previous years. This suggests that institutional design — how demand is financed, approved, and translated into work — matters more than headline guarantees.
From employment insurance to development investment
A major stated objective of VB–G RAM G is improving the quality and durability of assets. Works are to be clustered around water conservation, climate resilience, and core rural infrastructure, and embedded within village development plans.
In an era of climate volatility, such investments can yield long-term returns by stabilising agricultural output and rural livelihoods. However, this introduces a trade-off. Job guarantees are most effective when they are rapidly deployable, absorbing labour with minimal planning during sudden shocks. High-quality infrastructure, by contrast, requires technical design, sequencing, and longer gestation periods.
As the scheme tilts towards investment, it risks losing elasticity — becoming less responsive precisely when households need immediate income support.
The fiscal redesign and erosion of automatic stabilisation
The most consequential change lies in financing. Under MGNREGS, expenditure was demand-driven. When distress rose, spending rose — making the programme a de facto macroeconomic stabiliser.
VB–G RAM G replaces this logic with state-wise normative allocations. If demand exceeds the allocated envelope, states must finance the excess. This shifts fiscal risk away from the Centre — best positioned to absorb shocks — towards states, many of which are fiscally constrained.
In bad years, poorer states are likely to ration work, delay approvals, or tighten administrative filters rather than expand spending. What was once counter-cyclical risks becoming pro-cyclical, weakening the scheme’s stabilising role.
Seasonal pauses and misreading rural labour markets
The provision allowing a 60-day seasonal pause in employment assumes that rural labour markets tighten uniformly during sowing and harvesting. Evidence suggests otherwise. India’s rural labour markets are deeply segmented. Labour scarcity can coexist with acute household vulnerability.
For land-poor households, women workers, and those facing health or debt shocks, MGNREGS functioned not as a substitute for farm work but as a fallback when other income sources failed. A calendar-based suspension narrows the conditions under which the programme can respond, reducing its ability to cushion overlapping shocks.
What kind of state does VB–G RAM G imagine?
At its core, the reform reflects greater confidence in administrative foresight and ex ante planning. But resilience in an economy marked by frequent and uneven shocks depends less on predictability and more on adaptability — the capacity to respond ex post, quickly and at scale.
A rural employment system optimised for efficiency in normal times may falter under stress. The real test of VB–G RAM G will not be how well it builds assets in good years, but whether it can still function as a stabiliser when distress deepens.
What to note for Prelims?
- MGNREGS: rights-based, demand-driven rural employment programme.
- VB–G RAM G Act, 2025 replaces MGNREGS.
- Guaranteed days raised from 100 to 125.
- Shift to state-wise normative allocations.
- Focus on durable assets and climate resilience.
What to note for Mains?
- Difference between demand-driven and allocation-based welfare design.
- MGNREGS as a macroeconomic stabiliser.
- Federal implications of shifting fiscal risk to states.
- Trade-off between employment insurance and asset creation.
- Implications for resilience amid climate and economic shocks.
