Twenty years ago, India set a global benchmark in welfare policy by enacting the National Rural Employment Guarantee Act. At a time when many developing countries were retreating from rights-based social protection, India embraced an open-ended, demand-driven employment guarantee and, in doing so, briefly assumed the role of a vishwaguru in social policy innovation. The proposed VB-M RAM G Bill 2025, however, marks a decisive break from that legacy—and has ignited a debate about whether India is reforming or retreating from one of its most transformative welfare commitments.
How the employment guarantee became a global reference point
The idea of public works as crisis relief was not new in India. States such as Maharashtra had experimented with employment guarantee schemes since the 1970s. What made the National Rural Employment Guarantee Act distinctive was its scale, legal enforceability and political consensus. Passed unanimously by Parliament, it created a justiciable right to work for rural households, beyond party lines.
By 2011–12, evidence suggested that the programme—by then renamed the Mahatma Gandhi National Rural Employment Guarantee Act—was delivering tangible results. It generated over 200 crore person-days of employment annually for nearly 50 million rural households. Women accounted for close to half the workforce, while over 40% of workers came from Scheduled Castes and Scheduled Tribes. Independent surveys, including the National Sample Survey and the Indian Human Development Survey, broadly corroborated official data. Rural wages rose sharply, and several studies found that the scheme improved economic efficiency rather than crowding out productive work.
The slow erosion of a once-robust programme
The decline of MGNREGA did not stem from flawed design but from weakened political commitment. Over time, centralisation, technocratic controls, chronic underfunding, wage payment delays and weak action against corruption hollowed out implementation. While the scheme saw a temporary revival during the Covid-19 crisis, it never regained its earlier vitality. Importantly, most of these problems were administrative and political—fixable with intent—rather than intrinsic to the law itself.
What the VB-M RAM G Bill fundamentally changes
Critics argue that the VB-M RAM G Bill 2025 abandons the rights-based architecture of MGNREGA in favour of a centrally directed scheme. Under the proposed framework, the Centre retains sweeping discretionary powers but sheds core obligations. Responsibilities for providing employment, paying unemployment allowances, compensating for delayed wages and even ensuring adequate funding are shifted largely onto state governments.
The most contentious feature is the so-called “switch-off clause”, which allows the Centre to decide where and when the scheme applies. This undermines the very logic of an employment guarantee. A right that depends on executive discretion ceases to be a guarantee in any meaningful sense.
From open-ended funding to fiscal uncertainty
Equally significant is the proposed overhaul of financing. MGNREGA rested on the principle of open-ended central funding, ensuring that genuine demand for work was met. The new Bill replaces this with state-wise normative allocations and a 60:40 cost-sharing formula. Beyond the allocated ceiling, states must bear the full financial burden.
This shift reverses earlier incentives. Previously, states paid only a small share of material costs, encouraging them to sanction projects and respond to local demand. Under the new framework, poorer states—least able to mobilise resources—may hesitate to approve projects, weakening both employment generation and asset creation. The recent discontinuation of MGNREGA funding to West Bengal has heightened fears that fiscal discretion could be used politically.
Why cost-sharing weakens demand-driven employment
MGNREGA worked not only because people demanded work, but because communities demanded projects—wells, ponds, roads, orchards and housing. Since the Centre bore most costs, states had little reason to resist project approvals. By making states responsible for 40% or more of costs, the Bill risks choking this project pipeline. Worse, it imposes legally binding obligations on states without guaranteeing adequate funds, raising serious federal and constitutional concerns.
The illusion of reform: renaming and raising the ceiling
Two features of the Bill have distracted public debate. One is the renaming of the Act, which weakens its non-partisan character but is ultimately symbolic. The other is the enhancement of the employment ceiling from 100 to 125 days per household per year. While welcome in principle, this change is largely cosmetic. Only about 2% of rural households ever reached the 100-day limit. When the ceiling is rarely binding, raising it does little to expand real benefits—especially when financial constraints tighten elsewhere. Increasing wage rates would have had a far more meaningful impact.
What this means for India’s welfare state
Taken together, the switch-off clause, discretionary funding and cost-sharing model risk demotivating states and disempowering workers. Instead of correcting MGNREGA’s implementation failures, the Bill alters its foundational logic—from a rights-based guarantee to a conditional scheme. For critics, this represents not reform but dismantling by stealth.
What to note for Prelims?
- Key features and achievements of MGNREGA in its early years.
- Difference between rights-based guarantees and scheme-based welfare.
- Open-ended funding versus normative allocations.
- Centre–State cost-sharing patterns in welfare programmes.
What to note for Mains?
- How fiscal design affects the effectiveness of employment guarantees.
- Implications of centralisation for cooperative federalism.
- Why demand-driven employment matters for rural development.
- Debate between welfare reform and welfare retrenchment.
Whether the VB-M RAM G Bill marks the end of an era or merely a contested transition will depend on political response and public pressure. What is clear is that India stands at a crossroads: between renewing a historic social contract and redefining it in ways that may fundamentally alter the nature of rural welfare.
