New Scheme Replacing NREGA Dismantles the Idea of Economic Rights

It Ends Job Guarantee, Shifts Burden to States, Weakens Federal Cooperation

December 22, 2025

The Parliament has passed a new law called the Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin), or VB–G RAM G, repealing the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which had legally assured rural Indians a right to employment for up to 100 days a year. The new law removes this guarantee, alters how wages are determined and shifts more financial responsibility to the states. The implications are significant for India’s federal structure, its poorest citizens and the very idea of economic rights.

The Legal and Political Shift: From Rights to Discretion

The change from MGNREGA to VB–G RAM G redefines the nature of the relationship between the citizen and the state. Under MGNREGA, rural households could demand work from the state, and the government was legally obligated to provide it or pay compensation. Citizens had a legal tool to claim their entitlement.

VB–G RAM G changes this into a supply-driven scheme. Work will be provided only if projects are already approved in a region. This weakens the citizen’s position and strengthens bureaucratic control, effectively turning a statutory right into a rationed service.

Under the new scheme, the Centre decides whether the employment programme will be active in a particular state or district, at what time of year and for which types of projects. This means rural workers must wait for the Centre to approve a project in their area.

For example, imagine a village in Odisha where there’s been a drought and local farm work has dried up. Under MGNREGA, workers could demand employment, and the government would have to provide it within 15 days or pay compensation. Under VB–G RAM G, villagers cannot make such a claim. If the Centre has not approved any project in that district for that time period, no work will be available, regardless of the local need.

This puts rural households at the mercy of decisions made in Delhi, rather than allowing them to trigger work based on their own urgent circumstances.

The new scheme also changes how the programme is funded. Under MGNREGA, the Centre paid almost the entire cost, including all wages and most materials. Now, under VB–G RAM G, states must cover 40 percent of all expenses. This includes payments to workers, the cost of materials and administrative overheads. For poorer states with limited budgets, this can amount to several billions of rupees each year. In practice, this may lead to some states cutting back on the number of workdays, delaying wages, or diverting funds to other schemes.

This centralisation raises constitutional concerns about federalism, the principle that divides powers and responsibilities between the Union and the states. By controlling both the rules and their execution, while shifting more of the financial burden to the states, the Centre has reduced the autonomy that state governments previously held under MGNREGA.

The Economic Impact: Lower Wages, Higher Vulnerability

The new law could push already vulnerable rural workers into deeper insecurity. Under MGNREGA, while the implementation often lagged behind its promise, the law at least created pressure on the state to respond when work was demanded. It also injected cash into rural economies during lean agricultural seasons or natural disasters, acting as a “counter-cyclical cushion,” a common principle in welfare economics where governments support demand during downturns.

VB–G RAM G introduces two major economic setbacks. First, it continues the use of extremely low wage rates that are not linked to minimum wages set by the states. Legally, workers under any public employment programme should not be paid below the minimum wage, as ruled multiple times by the Supreme Court. Doing so amounts to forced labour, which is prohibited under Article 23 of the Indian Constitution. However, under both the previous and current schemes, the Centre has pegged wages below these thresholds. This is akin to a factory setting a maximum salary below what is legally allowed, then punishing workers if they don’t meet impossible productivity targets to earn it.

Administrative Consequences: Rigid Planning, Reduced Access

MGNREGA was often cited internationally as a good example of participatory planning, as gram panchayats (village councils) decided which projects to undertake, based on local needs and conditions. The scheme was not perfect, but the principle allowed for adaptation. This bottom-up planning is especially vital in a country with high geographic and socio-economic variation.

VB–G RAM G moves away from this. By requiring pre-approved projects and restricting when work can be given, including a 60-day ban during sowing and harvest seasons, it limits the ability of local authorities to respond to real-time needs. The assumption that farm labourers will find agricultural work during these months ignores the reality of surplus rural labour and regional differences in crop cycles. It also assumes that farm jobs pay and treat workers better, which is often untrue.

Reports, including by Deccan Herald, suggest that the Amarjeet Sinha Committee proposed tailoring the scheme differently for different states, depending on their levels of poverty and usage. While such differentiation might be needed, the government has not released the report or opened it to debate. By quietly turning this into a selective, centralised scheme without transparency or consultation, it has sidestepped democratic norms and accountability.

Rights, Inequality and Federal Trust

The repeal of MGNREGA has deeper consequences for Indian democracy. First, it sets a precedent for the dismantling of welfare rights. A scheme that was enshrined in law after intense public mobilisation is being replaced by executive discretion. Once a legal right is lost, regaining it is difficult. This makes the state less accountable to its citizens.

Second, the shift from guaranteed rights to conditional benefits is likely to increase inequality. The scheme may function better in states with more administrative capacity and money, while the poorer states, where people need such schemes most, may struggle to even keep them running. This undercuts the constitutional promise of equal opportunity and risks worsening regional tensions.

Third, the strain on federal trust is likely to grow. Centrally Sponsored Schemes are meant to be collaborative, but this one was passed without meaningful consultation with states, and with funding rules that most states are likely to find unfair. India’s Finance Commission had already warned against such top-down schemes, noting they often increase inequality rather than reducing it, according to the Herald. Yet, the new scheme seems to double down on exactly that.

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