Employment Guarantee Defused
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was an innovative attempt to hold the government accountable for safeguarding the right to work in rural areas. The new VB-GRAMG Act defeats this attempt by replacing MGNREGA with a centrally-sponsored scheme at the discretion of the Central Government. Under this Act, the Central Government has all significant powers and no legal obligations. These powers could easily be used to restrict of even dismantle the rural employment guarantee.
Accountability and the Law
Social legislations like the Mahatma Gandhi National Rural Employment Guarantee Act are quite different from ordinary laws. Most laws are aimed at making citizens or other entities accountable to the state. More precisely, they create obligations for these entities that are expected to be enforced by the state. On the other hand, MGNREGA and related social legislations such as the Right to Information Act and Right to Education Act are aimed at holding the state accountable to the citizens.
There is a clear difficulty here, since the apparatus of enforcement remains largely in the hands of the state. The state can hardly be expected to be very energetic in the task of holding itself accountable.
One way forward is for the said legislation to include the creation of an independent institution with some enforcement powers. This has worked to some extent with the Right to Information Act and its Information Commissioners, and to a much lesser extent with MGNREGA and other recent legislations for social and economic rights. The Right to Education Act, for instance, provides for the creation of a National Commission for Protection of Child Rights (NCPCR) as a watchdog of sorts, but serious questions have been raised about the independence of this Commission. The MGNREGA’s National Employment Guarantee Council, for its part, has been defunct for years at a time. Even when it is in place, it is firmly under the control of the Ministry of Rural Development, barely meets, and rarely prepares its mandatory annual report.
Another way forward is to build accountability provisions into the law. That was, for instance, one important role of the unemployment allowance in MGNREGA: if employment is not provided within fifteen days, the applicant is entitled to a dole under Section 7 (one fourth of the prescribed wage in the first 30 days, and one half thereafter). Aside from providing some relief, this helps to ensure that the state does not ignore people’s right to work. Similarly, when wage payments are delayed, workers are entitled to compensation (MGNREGA, Schedule II, Section 29). But the question remains – what if the government does not pay the unemployment allowance or compensation for late payment? Who is supposed to bell the cat?
In principle, the courts can help. It is a remarkable fact, however, that twenty years after the launch of MGNREGA no workers have gone to court to claim their rights (at least not to my knowledge). They have plenty of grievances, and the law is on their side, but they never approached the courts. Going to court would cost time and money, and the chances of a favourable judgment in good time are slim. In any case, most MGNREGA workers would not want to get entangled in a court case. A few NGOs and collectives did go to court (e.g. to demand the payment of minimum wages), but even they did not have much luck.
More than the courts, it is public pressure of one sort or another that prompts the government to abide by the law. Where rural workers are organised, they have achieved some success in claiming their rights under MGNREGA. Elsewhere, public pressure is relatively weak, and workers are largely at the mercy of the state’s good will.
The MGNREGA was drafted with some awareness of these difficulties. An effort was made to load the Act in favour of workers and to restrict the arbitrary powers of the state. This was possible because the first draft (largely adapted from Maharashtra’s earlier Employment Guarantee Act) was an initiative of social movements. At that time, it was expected that the employment guarantee law would quickly lead to a flourishing of rural workers’ organisations. As it turns out, this organisational process has been slow and patchy. As a result, MGNREGA has achieved limited success in holding the state accountable. When work is short, worksite facilities are lacking, or wages are delayed, the state tends to get away with it.
The summary replacement of MGNREGA with the oddly-named Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, alias VB-GRAMG Act, defeats earlier efforts to achieve some state accountability in this context. Under the VB-GRAMG Act, the Central Government has full powers and no significant obligations. Unlike MGNREGA, the VB-GRAMG Act was drafted by the Central Government, and naturally, the Central Government is trying its best to avoid any major responsibilities. In addition, the VB-GRAMG Act consolidates the recent trend towards centralization of MGNREGA. At every step, the prescriptions of the Central Government are to be followed.
State governments still have some obligations (such as meeting the demand for work and paying the unemployment allowance), but their ability to fulfil these obligations is going to be severely circumscribed by the impositions of the Central Government. Workers will pay the price, even if their rights are nominally much the same under the VB-GRAMG Act as under MGNREGA, with some major exceptions discussed below.
In short, the problem with the VB-GRAMG Act is not just that it restricts workers’ rights, but also that it makes it harder for them to claim their rights. By giving extensive discretionary powers to the Central Government, it largely defeats the original purpose of MGNREGA – holding the state accountable for safeguarding the right to work and related entitlements.
Spanners in the Wheel
The extensive powers of the Central Government under the VB-GRAMG Act could be used in at least five ways to dilute the employment guarantee or restrain employment generation.
The “Switch-Off” Clause
The switch-off clause is embedded in Section 5(1) of the Act. This section states the core principle of employment guarantee under the VB-GRAMG Act: employment on demand, up to 125 days per rural household per year. However, it mentions that this guarantee applies “in such rural area in the State as may be notified by the Central Government”. In other words, the Central Government is allowed to switch the guarantee on and off at its own discretion. This defeats the purpose of employment guarantee. The VB-GRAMG Act effectively provides a work guarantee without any guarantee that the guarantee will come into effect.
Incidentally, the United Progressive Alliance government had inserted a similar switch-off clause under Section 3(1) in the National Rural Employment Guarantee Bill before the Bill was tabled in the Lok Sabha on 21 December 2004. It is only under public pressure that this clause was qualified by a critical Proviso under Section 1(3) of the Bill. This Proviso (reinstated from the original draft of the Bill prepared by the National Advisory Council) states that the Act shall be applicable to the whole country within five years. It prevents Section 3(1) from being invoked to switch off the guarantee anywhere, since that would be tantamount to denotifying the Act itself in that area.
Seasonal Blackout
The seasonal blackout clause comes under Section 6 of the Act. This section directs state governments to specify a period of 60 days during peak agricultural seasons, such as sowing or harvesting time, when employment guarantee is to be suspended. The intention, presumably, is to avoid labour shortages in the peak season. However, this is an unnecessary complication as well as a dilution of the right to work. It is an unnecessary complication because very few rural labourers work on MGNREGA during the peak season in any case. They can earn much higher wages in the private sector at that time. It is a dilution of the right to work, not only by temporary discontinuation but also because every complication in the scheme makes it harder for workers to secure their entitlements.
Incidentally, some MGNREGA works take place in the peak agricultural season for good reasons. In Jharkhand, for instance, the plantation of mango saplings in MGNREGA orchards takes place in the month of July, when ploughing and sowing are in full swing. These orchards are among the best MGNREGA projects, they may not survive VB-GRAMG.
Budget Caps
In the VB-GRAMG Act’s new financial framework (under Section 22), the Central Government is expected to set a so-called “normative allocation” for each state. Beyond that, states have to bear all the costs. The normative allocations are supposed to be based on objective criteria, but of course, the Central Government sets the criteria. Within the normative allocations, costs are shared 60:40 between Centre and states.
Few states are likely to spend beyond the normative allocations. It is not an attractive proposition, because it means bearing all the costs while continuing to follow the prescriptions of the Central Government. Thus, normative allocations are likely to turn into de facto budget caps in most states, especially the poorer ones. Unless the normative allocations are very generous, these budget caps are bound to restrain employment generation.
In principle, if the demand for work cannot be met, state governments will have to pay the unemployment allowance. More likely, they will find ways of stifling the demand for work (it is not difficult to do, for instance by complicating the work application process or offering work at distant worksites). If so, employment generation will be budget-driven and employment guarantee will go by the window.
Convergence Clause
Section 4(1) of the VB-GRAMG Act states that all works undertaken under this Act shall originate from Viksit Gram Panchayat Plans. Section 5(4) of Schedule I further states that all these works are to be executed in convergence with other schemes notified by the Central Government.
The model for this approach has been set by the Pradhan Mantri Awas Yojana (PMAY). PMAY is a huge programme of subsidised housing for poor households, with an annual budget of more than Rs 50,000 crore in rural areas. Subject to prescribed formalities, funds for 90 days of unskilled labour are made available to each PMAY beneficiary under MGNREGA. In other words, the labour component of PMAY is largely provided by MGNREGA.
The problem with this approach is that it does not easily generate additional employment. The whole idea of MGNREGA is to generate additional employment, but in converged schemes, it largely substitutes for the labour component of these schemes. If the VB-GRAMG Act is to generate additional employment through converged schemes, then additional material costs also have to be factored in. And converged schemes tend to be material-intensive. Under PMAY, for instance, the unskilled labour component (90 days of work) is barely 20% of total costs (typically Rs 1.2 lakh or so), compared with a norm of at least 60% in MGNREGA.
VB-GRAMG workers are likely to turn into a handy labour force for all sorts of schemes sponsored by the Central Government, such as the construction of rural roads, anganwadis, bus stands, storage sheds, and so on. There is nothing wrong with this per se, except that it will generate little additional employment unless the Central Government (or state governments, as the case may be) spend huge amounts on the material components of these schemes. More likely, the Central Government will take “convergence” as an opportunity to save money, by using the VB-GRAMG Act to fund the labour component of schemes without additional employment.
The only way to generate large-scale employment under the VB-GRAMG Act in the convergence approach would be to promote labour-intensive converged schemes. As of now, however, it is not clear what these schemes would be, or what purpose convergence would serve if the bulk of the costs consist of unskilled labour. Further, convergence also tends to be a source of complications. There is no indication that the Central Government has a credible plan to generate mass employment in the proposed convergence framework.
In any case, the convergence clause could easily become an impediment for gram panchayats in the planning process. Under MGNREGA, any work is allowed as long as it belongs to the list of permissible works. The VB-GRAMG Act, too, has a list of permissible works, but in addition, all works will have to conform to the parameters of the notified convergence schemes.
Digital Technology
In the VB-GRAMG Act, there is a relentless insistence on the use of advanced digital technology (the word “digital” appears 33 times in the Act). GIS tools, biometric authentication, mobile monitoring, artificial intelligence, e-tendering, real-time dashboards and other digital technologies are being promoted and prescribed throughout. At one level, there is nothing new here, since digital technology is already being used with abandon in MGNREGA. What is new is that these technologies are mandatory. The law can be invoked to justify any number of digital innovations, however inappropriate they may be.
This is not a minor issue, because there is a rich history of counter-productive technocracy in MGNREGA. Immature, unreliable or exclusionary technologies such as the Aadhaar Payment Bridge System (APBS) and National Mobile Monitoring System (NMMS) have been repeatedly imposed from Delhi, with little regard for the rights of MGNREGA workers. The long saga of delayed, diverted, rejected or blocked MGNREGA wage payments has a lot to do with these technological impositions. In the last few years, many MGNREGA workers have not been paid at all due to NMMS failures. MGNREGA functionaries, too, often complain of the tyranny of inappropriate digital technology. Even the recent Amarjeet Sinha committee report, submitted to the Ministry of Rural Development in 2023, was constrained to make the following observation after extensive field visits: “Resistance to the National Mobile Monitoring System appeared almost universal among workers, mates, and local officials.” This observation, alas, fell on deaf ears.
In Jharkhand, payment problems and other technological failures (along with the stagnation of MGNREGA wages in real terms) have sapped the interest of rural workers in MGNREGA. “Why should we work on MGNREGA if we are not paid on time?” is a common refrain. This may seem to jar with the fact that MGNREGA employment levels have been consistently high (around 300 crore person-days per year) in the last few years. But there is, in fact, some evidence that MGNREGA employment levels are actually much lower today than they were in the early years of the programme, contrary to official statistics.[1]
There is a view that technological hurdles have been intentionally used to stifle the demand for MGNREGA work or even to ruin MGNREGA. I am not clear about this myself, because the intentions of the government are hard to fathom (for one thing, it is not a monolithic entity). But I do feel that technology can be used or rather misused in that way, and that the VB-GRAMG Act enlarges the scope for this sort of “obstructionism”.
None of this is to deny that digital technologies also have constructive uses. The VB-GRAMG Act, however, perpetuates a blind faith in digital technology that has not served MGNREGA well so far.
Wage Rates
There is a sixth lever the Centre can use to suppress the demand for work. This one carries over from MGNREGA, and the Centre has already used it for this purpose. I am referring to the Centre’s power to determine wages. More than sixteen years have passed since MGNREGA wages were effectively frozen in real terms. Money wages are raised every year, but only to the extent of price increases (based on an outdated price index, the CPI-AL). Meanwhile, market wages have risen in real terms, albeit slowly. For this reason, too, MGNREGA work is much less attractive today than it used to be.
MGNREGA wages rates are determined under Section 6 of the Act. Section 6(1) empowers the Central Government to set the wage, or different wages for different areas (read states). Section 6(2) says that in the meantime, state-specific minimum wages apply. In the early years of MGNREGA, workers earned the state minimum wage under Section 6(2). In late 2009, however, the Central Government activated Section 6(1) and set MGNREGA wages at Rs 100 per day in most states. From then on, they were effectively indexed to the CPI-AL. The justification for activating Section 6(1) was that it was anomalous for states to set the wages when wages were fully paid by the Centre. Under the VB-GRAMG Act, however, wage costs are shared. Thus, it would have been natural to scrap Section 6(1) and revert to the situation where workers earn the state-specific minimum wage. Instead, the Central Government effectively scrapped Section 6(2) and retained the power to set wages (under Section 10 of the VB-GRAMG Act). This creates an even more anomalous situation where wages are set by the Centre, but fully paid by the state government in the event where the demand for work exceeds what can be provided within the “normative allocations”. It also prolongs a questionable if not illegal scheme of things where workers earn less than the minimum wage.
If the stagnation of real wages continues under the VB-GRAMG Act, employment levels are likely to decline sooner or later. Some economists feel that this would be a good thing, because they see employment guarantee as a temporary intervention that needs some sort of “sunset”. The value of employment guarantee as an answer to rural unemployment, however, does not vanish as the economy grows. Indeed, there are serious proposals for employment guarantee acts in affluent countries, including the United States.
Silver Lining?
One provision of the VB-GRAMG Act expands workers’ rights: the extension of employment guarantee from 100 to 125 days per household per year. This enhancement is welcome, but it is little more than a consolation sop, for two reasons. First, only two per cent of households in rural India get a full 100 days of employment under MGNREGA. When the ceiling is not binding, raising it makes no difference. Second, raising the ceiling is all the more cosmetic when budget caps threaten to pull the other way.
In any case, this extension could have been done under MGNREGA, without even requiring an amendment of the Act. It is no justification whatsoever for the VB-GRAMG Act. Indeed, a few states (e.g. Chhattisgarh and Rajasthan) are already guaranteeing 125 days under MGNREGA.
Conclusion
Clearly, the Centre is not short of means to defuse employment guarantee under the VB-GRAMG Act. Those who trust the benevolence and competence of the Modi government may feel that there is no reason to worry about this. But the idea of a legal framework for employment guarantee is to free workers from dependence on the mercy of the state. And the experience of the last 12 years is not exactly a certificate of commitment to employment guarantee on the part of the National Democratic Alliance. This period began with failed attempts to restrict employment guarantee to selected districts or impose budget caps (in 2014), and ended with the Central Government washing its hands of all legal obligations for employment guarantee. It is only during the Covid-19 period that the Central Government fell back on MGNREGA to save the day.
I am not suggesting that employment levels are going to crash as soon as MGNREGA is repealed in favour of the new VB-GRAMGA schemes (this is due to happen on whatever “appointed date” is notified by the Central Government under Section 37). Quite likely, the Central Government will try to avoid this and even project the new Act as a success. But the realisation of employment guarantee and workers’ rights may not count for much in the success criteria. Over time, employment generation is likely to decline as the restrictive features of the new framework make themselves felt. Even if the VB-GRAMG Act manages to sustain relatively high levels of employment generation, the spirit of employment guarantee is unlikely to survive.
None of this to say that MGNREGA was doing fine. Centralization, technocracy, underfunding, erratic wage payments, failure to act on corrupt elements and other problems have plagued the programme in recent years. But the VB-GRAMG Act contains few constructive provisions, if any, that might help to address these problems. Instead of nursing the patient, it prescribes dubious shock treatment.
Perhaps the time has come for some state governments to consider framing their own rural employment guarantee act. In the short run, it would be difficult for them to foot the bill. State revenues, however, are growing steadily. If this trend continues, some states may be able to fund their own employment guarantee acts. Maharashtra has done it before, surely it can be done again. This would liberate the states from the growing burden of centralized micro-management. It would also be an opportunity to explore different approaches to employment guarantee – the learning phase is far from over.
[1] Drèze, J. and Somanchi, A. (2025), “Preventing Corruption: Ups and Downs of India’s Employment Guarantee”, forthcoming at ssrn.com.