MGNREGA to VB-G RAM G: The overhaul of India’s rural job guarantee needs field trials before its full rollout

What explains this shift and what is its context?

In 2004, India made a distinctive choice: an unconditional public employment guarantee for rural citizens. Most countries, up to that point, had relied on conditional income support or unemployment assistance during periods of distress.

The backdrop was the NDA government’s defeat in the 2004 election. Despite strong economic growth, rural India had not fared well. So the new UPA government chose a universal, demand-driven employment guarantee that entitled rural residents to 100 days of work with no pre-conditions. If work was not provided within 15 days of a demand, an unemployment allowance was payable, though this was rarely enforced.

In short, MGNREGA was based on the fact that meaningful jobs in rural India were scarce. Any reform of this scheme should start with an assessment of that premise. What is the current evidence on MGNREGA and rural employment in general?

About 2.2% of working-age (15-59 years) women and 0.13% of men in rural India in 2023-24 reported being engaged in ‘casual wage employment in public works’—a good proxy for MGNREGA employment, as per our calculation based on Periodic Labour Survey data. That is 8.5 million women and 0.5 million men. Administrative MGNREGA data shows that average household participation is only about 50 days of work per year.

How large is the pool of unmet demand for work under MGNREGA that remains invisible in the scheme’s official statistics? This can be inferred from rural unemployment rates. In 2023-24, 2.5% of working-age men in rural India were unemployed; that is, they were looking for work but did not find it. Women’s unemployment was also low, at 1.2%. However, this masks the fact that around 37% of women were not seeking work, partly discouraged by the unavailability of suitable jobs. In contrast, less than 2% of men were not looking for work.

Employment data, however, cannot fully capture alternative job opportunities, since people may choose not to take up available jobs and instead opt for MGNREGA work. Wage data can offer an important clue: if wages in other occupations, especially in farming-related work, are significantly higher than MGNREGA wages, it suggests workers could have taken up that work.

While the average MGNREGA nominal wage rose from about ₹133 in 2013-14 to ₹253 in 2024-25, market wages for other rural work were higher over that period. As per official numbers, by 2024-25, all-India average daily wages were about ₹398 for male general agricultural labourers ( ₹316 for women) and ₹441 for male construction workers ( ₹343 for women).

Our analysis indicates that when farm wages were ₹150–200 higher on average than MGNREGA wages, many workers chose not to take up farm employment, perhaps because of its greater physical demands.

Implicitly, the formulation of VB-G RAM G suggests that MGNREGA has come to be preferred over farm work, which may explain why the new programme has a provision for suspending it during peak harvest periods. So, during those months, if there is no non-farm or public-work employment available, then the trade-off for rural labour becomes either zero earnings or farm wages.

Job-guarantee reforms should also have taken stock of who repeatedly seeks work. There is a lack of publicly available data on the extent of households’ routine reliance on MGNREGA.

A big policy question, thus, remains unanswered: Does India’s job guarantee programme primarily serve as a temporary buffer against shocks, or does it lead to continuous dependence on the state among a subset of households?

While job-guarantee reforms were necessary, the manner in which the new framework has been enacted, with no public documentation of consultation with states, raises concerns. The revised funding structure, which shifts 40% of costs to states, reduces the Centre’s fiscal responsibility and may adversely affect the scheme-implementation capacity of states.

While job-guarantee reforms were necessary, without a pilot trial run of the redesign in at least one large Indian state that could have helped assess its impact, the shift rests on weak empirical ground. As the new scheme unfolds, a phased implementation schedule would help ensure that the revision is informed by ground evidence.

Of course, the only durable solution lies in expanding non-farm quality employment, especially as India’s rural youth are increasingly better educated. This is particularly important for women, single or married, many of whom are unable to migrate to urban areas for work.

Ultimately, the debate is not about either preserving or replacing MGNREGA, but about aligning the rural employment landscape with the realities of a changing labour market in the country.

The authors are, respectively, Union Bank Chair professor of economics, Great Lakes Institute of Management, and assistant professor, Institute of Management Technology.