The Union government has notified the discontinuation of the Mahatma Gandhi National Rural Employment Guarantee Scheme, effective July 1, 2026, triggering immediate calls for an all-India strike by MGNREGS workers on May 15 and severe criticism from farmer and labour organisations. The NREGA Sangharsh Morcha and the All India Kisan Sabha described the scheme as “the only legal guarantee of employment” for rural workers, arguing that it has served as a crucial lifeline for poor peasants, agricultural labourers, women, and rural youth.
The significance of this development is difficult to overstate. MGNREGS is not merely a government scheme; it is the operationalisation of Article 41 of the Constitution, which recognises the right to work as a Directive Principle of State Policy. The Mahatma Gandhi National Rural Employment Guarantee Act, 2005, was a landmark piece of social legislation that created a legally enforceable entitlement to 100 days of guaranteed wage employment per rural household per year, with a corresponding legal obligation on the government to provide work or pay an unemployment allowance.
💡 Get AI-powered exam prep on your phone!
For UPSC aspirants, the discontinuation raises fundamental questions about the enforceability of socio-economic rights, the fiscal sustainability of rights-based entitlements, the VB-GRAM(G) Act that apparently replaces or modifies MGNREGS, the political economy of rural welfare, and the relationship between employment guarantees and rural poverty.
Background and Context: MGNREGS as a Legislative Achievement
Five Important Key Points
- The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 was enacted under Article 41 of the Constitution (a Directive Principle of State Policy), creating a legal entitlement to 100 days of guaranteed wage employment per rural household per financial year, with a provision for unemployment allowance if work is not provided within 15 days of demand.
- MGNREGS has been India’s largest public employment programme and one of the world’s largest social protection schemes, covering approximately 15 crore rural households at its peak utilisation during the COVID-19 pandemic years, with expenditure exceeding Rs. 1 lakh crore in peak years.
- Worker and farmer organisations demanding continuation of MGNREGS have called for its expansion to at least 200 days of guaranteed employment and a minimum wage of Rs. 700 per day indexed to inflation, compared to the current statutory minimum wage of approximately Rs. 267 per day in 2024-25, which critics argue is insufficient for basic sustenance.
- Budget allocations for MGNREGS have been declining from a high of Rs. 1,11,500 crore in FY 2020-21 to approximately Rs. 86,000 crore in FY 2024-25, while organisations allege that “exclusionary technological barriers” such as Aadhaar-based payment authentication and geo-tagging requirements have reduced effective access for the most vulnerable workers.
- The VB-GRAM(G) Act, cited by the AIKS as undermining the rights-based character of MGNREGS, appears to introduce modifications to the scheme’s implementation framework, though the full details of this legislation require further examination for a complete assessment of its implications.
Legislative and Constitutional Foundation
The MGNREG Act, 2005 was a legislative innovation of extraordinary significance because it converted a Directive Principle into a justiciable entitlement. While Directive Principles under Part IV of the Constitution are generally non-justiciable, the Act created a statutory right enforceable in courts, meaning that a rural household demanding work and being denied it could seek legal remedy.
This rights-based approach distinguished MGNREGS from conventional government schemes, which exist at the discretion of the executive and can be discontinued by administrative decision. The question of whether a simple administrative notification can repeal an Act of Parliament without legislative action is fundamental. The notification of discontinuation from the Union government on Monday (as reported in the newspaper) raises an immediate constitutional question: if MGNREG Act, 2005 remains on the statute books, can the scheme be discontinued by executive notification?
If the VB-GRAM(G) Act represents a replacement legislation that effectively supersedes the MGNREG Act, its parliamentary passage and the procedural history of its enactment require careful scrutiny to assess whether the rights-based character of the employment guarantee has been preserved, modified, or extinguished.
The Economic Case For and Against MGNREGS
Proponents of MGNREGS point to extensive empirical evidence of its impact: consumption smoothing for rural households during agricultural lean seasons, reduced distress migration, wage floor effects that have increased agricultural wages across rural India, creation of durable community assets including water conservation structures, rural roads, and afforestation, and its role as an automatic stabiliser during economic downturns such as the pandemic.
Critics, including some within the economic establishment, argue that MGNREGS has been associated with labour supply distortions in the agricultural sector, fungibility issues where employment guarantee funds are not always efficiently converted into productive assets, administrative corruption and ghost beneficiary problems, and fiscal sustainability concerns at scale.
The PLFS 2025 data cited in the same newspaper edition is directly relevant here: it shows India’s overall unemployment rate at 3.1 percent, but youth unemployment at 9.9 percent, and urban young women’s unemployment at 18.9 percent. The worker-population ratio has risen from 39.7 percent in 2022 to 43.5 percent in 2025. These figures suggest an economy generating employment, but not necessarily in forms that meet the dignity and wage aspirations of a rapidly educated workforce.
Social Protection and Gendered Dimensions
MGNREGS has been one of the most significant government programmes for women’s economic inclusion. The Act mandates that at least one-third of beneficiaries be women, and in practice, women often constitute 50 percent or more of workers in many States. This guaranteed access to wage employment outside the household has had documented effects on women’s bargaining power, financial autonomy, and nutritional outcomes for children.
The discontinuation of MGNREGS would disproportionately affect women workers, particularly in States like Rajasthan, Tamil Nadu, and Andhra Pradesh where the programme has been most extensively utilised by women. Any replacement scheme must be assessed specifically on whether it maintains or improves women’s access to guaranteed wage employment.
Federalism and State-Level Implementation Variations
MGNREGS is a Centrally Sponsored Scheme with costs shared between the Centre and States, with the Centre bearing wages, three-fourths of material costs, and administrative expenses, while States bear one-fourth of material costs and unemployment allowances. Its implementation has varied enormously across States: Rajasthan, Tamil Nadu, and West Bengal have been high-performing States, while others have chronically underutilised their allocations.
This variation means that the impact of discontinuation will be geographically uneven, with the most vulnerable populations in high-utilisation States facing the greatest welfare loss.
Way Forward
The most critical immediate step is judicial review. If the MGNREG Act, 2005 has not been formally repealed by Parliament, the administrative notification of discontinuation is vulnerable to constitutional challenge on grounds of violation of the statutory rights it creates. Parliament should conduct a comprehensive review of MGNREGS’s achievements and limitations before any legislative change, incorporating evidence from academic research, CAG audits, and beneficiary assessments. If a replacement scheme is intended, it must preserve the rights-based character of the employment guarantee, maintain gender quotas, and address proven weaknesses in implementation rather than eliminating the entitlement itself.
Relevance for UPSC and SSC Examinations
This topic falls under UPSC GS-II (Government Schemes, Social Justice, Women’s Empowerment, Federalism), GS-III (Employment, Agriculture, Rural Development, Poverty), and GS-IV (Ethics of Social Welfare Policy). For SSC, it covers government schemes, labour laws, and social protection topics.
Key terms: MGNREG Act 2005, Article 41, Directive Principles of State Policy, rights-based entitlement, unemployment allowance, Aadhaar-based payment, worker-population ratio, PLFS 2025, VB-GRAM(G) Act, Centrally Sponsored Scheme, labour market.