India’s rural employment guarantee offered the poor a job security net that’s about to weaken

This Act, which replaces MGNREGA, effects not just a change in nomenclature but a fundamental shift in India’s approach to the provision of public employment as a means of livelihood security.

Public employment schemes have long been part of livelihood security and poverty alleviation initiatives; a form of job guarantee has existed in Maharashtra since the 1970s.

What made MGNREGA different was its rights-based approach that was justiciable and unconditional for every rural household. It was far from a full right to employment or livelihood, with the maximum days of employment restricted to 100 for a household.

But it was universally acknowledged to have played an important role in improving rural infrastructure, raising agricultural productivity and reducing poverty.

The biggest evidence of its success emerged during the covid pandemic, when it became the lifeline not just for many poor rural households, but also millions of migrants who returned to villages.

What made MGNREGA so important for the rural economy were not just its tangible benefits, but its existence backed by law. Its universal and unconditional nature made it a lifeline for many.

When the government tried to scuttle the programme in West Bengal, the Supreme Court ruled that the programme cannot be stopped on mere technicalities. The availability of alternative work at government-specified wages meant that it had an indirect impact by tightening the labour market.

There is also sufficient evidence to suggest that MGNREGA helped push up rural wages and reduce poverty from 2004-05 to 2011-12. Over the years, MGNREGA has seen many of its provisions diluted, with restrictions imposed by state and central governments.

Wages under MGNREGA, which were higher than market levels initially, are now only two-thirds of market wages. But it continued to witness demand for work, with an overwhelmingly large number of workers being women and those from marginalized communities.

The new law dismantles this very foundation of MGNREGA. It takes away the rights-based approach where every worker can demand work within the maximum limit. The VB-G RAM G Act now requires funding allocations to be made by the Centre based on ‘objectives’ determined by it.

It also has a provision to suspend the guarantee during the peak agricultural season, aggregating 60 days. Most households do not seek MGNREGA work during India’s peak farming season when farm employment is available, but the fact that guaranteed work was available helped rural workers bargain for better wages.

MGNREGA helped raise wages, but more importantly, it acted as a cushion by providing back-up income during drought periods, policy shocks or other times of scarce agricultural work. With wages below market levels in 22 states, the guarantee had been diluted anyway.

Prohibiting its implementation during peak season will pressure wages lower at a time agricultural wages have been stagnant and real non-farm wages have been declining for almost a decade.

The promise of increasing the maximum number of guaranteed workdays to 125 from 100 is hardly any solace, given that in the last two decades, the average number of days utilized has been less than 50, with barely 2-3% of households availing the maximum allowance.

The VB-G RAM G Act also changes the financial allocation for the programme. It was mostly centrally-funded, with the central government bearing 90% of its cost. Now, the Centre will bear only 60% of the cost for large states, with exceptions for some small states and Union territories.

Unlike MGNREGA, which was meant to provide employment and income opportunities for households in poorer states, the new law will penalize the states with weak fiscal capacity.

In a way, it dismantles the entire edifice of the law, which was designed to provide social security through guaranteed employment everywhere, including India’s poorest districts. Inequality will rise across states, hurting those with low productivity and per capita income.

MGNREGA was the only social protection available to a majority of the poor, with almost one-third of rural households participating in the programme. Diluting this basic minimum will exacerbate rural distress and slow the revival of India’s rural economy.

The author is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.