On May 12, 2026, the Union government officially notified that from July 1, 2026, all rules, notifications, schemes, orders, and guidelines made under the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA) will stand repealed. In their place, the Viksit Bharat — Guarantee for Rozgar and Ajeevika Mission (Gramin), or VB-G RAM G Act, will come into force. Union Rural Development Minister Shivraj Singh Chouhan described the transition as the “dawn of a new era,” yet the shift has drawn sharp criticism from opposition parties, civil society, and labour economists for its lack of pre-legislative consultation and several unresolved structural concerns.
This development is of enormous significance for UPSC aspirants because it represents the replacement of a landmark demand-driven welfare legislation, enacted under the Congress-led UPA government in 2005, with a supply-side framework that fundamentally alters the architecture of rural employment guarantee. The constitutional questions around Parliament’s legislative competence, the federal balance in rural development, the rights-based versus welfare-based approach to employment, and the implications for India’s agrarian economy are all live issues that could feature prominently in GS-II and GS-III papers.
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The change also comes at a time when India is navigating a West Asia energy crisis, with El Niño threatening agricultural output, and when 11.58 crore registered MGNREGA workers — nearly 45.4 percent — are yet to complete e-KYC, raising immediate concerns about implementation readiness and exclusion of vulnerable populations.
Background and Context
Five Important Key Points
- The VB-G RAM G legislation was passed by Parliament in December 2025 without pre-legislative consultations, breaking a convention that major welfare laws undergo stakeholder deliberation before enactment.
- Under the new scheme, the statutory employment guarantee has been increased from 100 days to 125 days per financial year, but the wage bill sharing has changed from 100 percent Centre-funded to a 60:40 ratio between the Centre and most States, fundamentally shifting fiscal burden.
- As per a LibTech study dated May 7, 2026, approximately 11.58 crore registered workers (45.4 percent) and 0.95 crore active workers (9.5 percent) are yet to complete mandatory e-KYC, raising the spectre of large-scale exclusion during the transition.
- Unlike MGNREGA’s demand-driven design that stretched the budget to match ground-level demand, VB-G RAM G operates on a normative budget framework, the objective parameters and formula for which the government has not yet publicly clarified.
- The new legislation includes a blackout period of up to 60 days, to be notified by States, ostensibly to ensure agricultural labour availability during peak seasons — a provision critics argue weakens workers’ bargaining power.
Historical and Legislative Background of MGNREGA
MGNREGA, enacted in September 2005 under the National Rural Employment Guarantee Act, was one of the most significant social legislation achievements of post-liberalisation India. Emerging from recommendations of the National Advisory Committee, the Act guaranteed 100 days of unskilled manual work per year to every rural household whose adult members volunteered for it. It was rights-based — meaning workers had a legally enforceable right to employment, backed by unemployment allowances if work was not provided within 15 days. The programme was fully funded by the Central government in terms of wages, making it arguably the most visible expression of the Centre’s redistributive social contract with India’s rural poor.
Over two decades, MGNREGA transformed rural India’s bargaining dynamics, raised agricultural wages, improved women’s labour force participation, built rural infrastructure, and acted as an automatic stabiliser during droughts, floods, and the COVID-19 pandemic. By 2025-26, it had generated over 300 crore person-days of employment in peak years and was considered a constitutional expression of Article 41, which directs the State to secure the right to work within its economic capacity.
Constitutional Framework and Rights-Based Dimensions
The constitutional basis of employment guarantee schemes rests on Part IV — the Directive Principles of State Policy. Article 41 directs the State to make effective provision for securing the right to work, while Article 43 mandates a living wage and decent conditions for workers. Article 21, as interpreted by the Supreme Court in several right-to-food and livelihood cases, has been read to include the right to livelihood as part of the right to life.
The critical constitutional question raised by VB-G RAM G is whether shifting from a demand-driven, rights-enforceable framework to a normative budget system amounts to a regression in the State’s constitutional obligations. The Supreme Court had, in orders related to the right to food (PUCL v. Union of India), emphasised that welfare schemes with legislative backing carry stronger enforceability. Replacing MGNREGA without pre-legislative consultation arguably bypasses the deliberative constitutional process.
Furthermore, rural development and labour are concurrent list subjects (List III, Entries 23 and 24), meaning both Parliament and State Legislatures have jurisdiction. The wholesale repeal of existing State-level rules and schemes under MGNREGA through a Central Act notification raises questions about cooperative federalism.
Key Structural Changes and Policy Analysis
The most consequential change introduced by VB-G RAM G is the shift from demand-driven to normative budgeting. Under MGNREGA, the Centre was obligated to fund as many days of work as rural workers demanded, creating an open-ended fiscal commitment. Under VB-G RAM G, each State’s allocation will be determined by a centrally decided formula — the specific parameters of which remain unpublished. This opacity is a serious governance concern because States cannot plan their rural employment budgets without knowing the formula in advance.
The 60:40 cost-sharing arrangement also places a significant burden on State finances at a time when many States are already dealing with fiscal pressures arising from the West Asia energy crisis, rising subsidy bills, and the post-election implementation of new welfare schemes. For poorer States like Bihar, Jharkhand, and Odisha — which depend heavily on Central funding — this change could result in reduced labour absorption, particularly during agricultural lean seasons.
The extension of the employment guarantee from 100 to 125 days, while ostensibly progressive, is conditional on the normative budget being adequately funded. Without a transparent formula and guaranteed Centre contribution, the additional 25 days may be illusory.
Digital Infrastructure Concerns and Exclusion Risks
The government has clarified that existing e-KYC-verified job cards will remain valid until new Gramin Rozgar Guarantee cards are issued, and that workers will not be denied employment solely due to pending e-KYC. However, the ground reality is more troubling. With 45.4 percent of registered workers yet to complete e-KYC — many of them migrants, tribals, and women without reliable internet access — the transition period creates a window during which large-scale exclusion is plausible.
The continued reliance on the National Mobile Monitoring System (NMMS) for attendance in areas with poor internet connectivity is another concern. Civil society organisations have repeatedly documented how NMMS failures lead to delayed wage payments, which are already a systemic problem under MGNREGA.
Federal Implications and State Autonomy
The notification that all State-level rules under MGNREGA will stand repealed from July 1 without an adequate transition period represents a centralising impulse that sits in tension with the spirit of cooperative federalism articulated in the Supreme Court’s judgments and the Sarkaria and Punchhi Commission recommendations. States had developed contextualised MGNREGA implementation frameworks over two decades; their summary repeal risks institutional memory loss.
Challenges in Implementation
The government has acknowledged that States will have a maximum of six months to complete necessary preparations, including infrastructure building and rule framing. Given India’s administrative complexity, this timeline is extremely tight. The blackout period provision, allowing States to suspend employment guarantee for up to 60 days, may also be misused by States to deny work during periods when labour demand is otherwise high.
Way Forward
Parliament and the Ministry of Rural Development must urgently publish the normative budget formula with transparent, consultative parameters before July 1, 2026. The 60:40 cost-sharing should be revisited for low-income States, with the Central share maintained at 90 percent or higher for states below a certain per-capita income threshold. The e-KYC transition must be time-bound, with adequate facilitation camps at worksites. A Joint Parliamentary Committee review of the implementation should be constituted, given the absence of pre-legislative consultation. Independent monitoring by the Comptroller and Auditor General should be mandated for the first three years of VB-G RAM G implementation.
Relevance for UPSC and SSC Examinations
This topic is relevant for UPSC GS-II (Government Policies and Interventions for Development, Welfare Schemes, Federalism, Constitutional Provisions for Weaker Sections) and GS-III (Indian Economy, Employment, Poverty Alleviation). For the UPSC Essay paper, the replacement of MGNREGA connects to themes of welfare state, rights-based versus service-based governance, and constitutional obligations of the State. For SSC General Awareness, key points include the year of MGNREGA enactment, its funding structure, and the new VB-G RAM G framework. Key terms to remember include demand-driven vs normative budgeting, e-KYC, job card, wage cost sharing ratio, Articles 41 and 43, concurrent list, and the Sarkaria Commission.