Revamping rural employment: New law will bring significant changes

The Union government on Tuesday introduced the Viksit Bharat- Guarantee for Rozgar and Ajeevika Mission (Gramin) Bill (or VB-G RAM G Bill) in Parliament to revise the rural employment-guarantee programme, currently run under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). It has been argued that the rural economy has changed significantly since the MGNREGA came about two decades ago and that the new law takes into account the changed realities and needs of rural India. It indeed proposes to make significant changes in the way employment is provided, some of which are being contested, including by various state governments.

 

The Bill proposes to increase the number of guaranteed days of employment to 125 per household. This should benefit those seeking work in rural India. However, it is worth noting that, on average, only about 50 days of employment has been provided under the MGNREGA over the past two decades, against the mandate of 100 days. Thus, increasing the number of days will help only if enough employment opportunities are created and provided. It has been reported that workers seeking work under the MGNREGA did not always get employment. In this context, it is worth highlighting that the new scheme, unlike the MGNREGA, will not be demand-driven. There will be normative funding as in most central schemes. This will allow better planning and ensure predictability. It will be a centrally sponsored scheme, and the financial burden, as in the case of other central schemes, will be shared by the states.

 

Under the MGNREGA, states provided 25 per cent of the material and 50 per cent of the administration costs. Thus, sharing 40 per cent of the overall costs by most states will likely increase their financial outgo. It can be argued that this will improve monitoring and implementation of the scheme because the states will now have a bigger stake. However, it’s possible that some states may not be in a position or willing to increase expenditure. In fact, it raises bigger questions about the centrally sponsored schemes in general. As the Reserve Bank of India’s last state finance report (2024) rightly noted, too many central government schemes affect the flexibility of state governments in spending. There is a case for rationalising central schemes. In the spirit of federalism, states should have more freedom to spend. It would be interesting to see how the Sixteenth Finance Commission has approached the issue.

 

The other important aspect of VB-G RAM G is that it takes into account the requirements of labour in the farm sector. States may notify periods of up to 60 days in aggregate during sowing or harvesting when work under the scheme will be suspended to ensure the availability of labour for agricultural work at reasonable wages. Further, the new law aims to provide rural employment and create durable infrastructure by focusing on areas such as water security, work to mitigate extreme weather events, and core rural infrastructure. It envisions a localised planning for work integrated with national spatial systems. More broadly, while the proposed law contains both improvements and contestable provisions, it should not be viewed as an answer to the employment challenges India faces. The MGNREGA proved to be an excellent support system during the pandemic, and demand for work under it is reported to be falling, which is a positive sign. Irrespective of the name of the employment-guarantee scheme, the policy focus should be on creating better-paying jobs so that dependence on such schemes reduces progressively. Finally, it’s worth debating whether dropping “Mahatma Gandhi” was necessary in framing a new law providing guaranteed rural employment.