Government says a stronger rural economy justifies replacing MGNREGA with the new VB GRAMG Act
Economic Survey points to rising rural incomes, consumption and falling demand for MGNREGA work
Person-days under MGNREGA have fallen by more than 50% since the pandemic peak, the Survey says
Experts warn exclusions driven by data mismatches and budget caps risk denying genuine entitlements
In the Economic Survey 2025-26, tabled in Parliament on January 29, 2026, the Centre cited improving rural economic conditions to argue for a revamp of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), proposing its replacement with the controversial Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, or VB-GRAMG.
The survey said rural development lay at the heart of India’s push towards inclusive economic growth, given that a significant share of the population continues to live in rural areas.
With 665,000 villages and 268,000 gram panchayats and rural local bodies, the rural landscape forms the backbone of India’s social and economic development, the survey said.
It stated that government initiatives have focused on infrastructure, access to credit, basic amenities, and the development of agriculture and traditional industries, making the rural economy more self-reliant and resilient.
Citing the latest round of National Bank for Agriculture and Rural Development (NABARD)’s Rural Economic Conditions and Sentiments Survey from November 2025, the Survey said rural economic fundamentals had strengthened across the board.
“NABARD’s latest RECSS round findings show a broad-based strengthening of rural economic fundamentals, with robust consumption, high income growth, rising investment, improved formal credit access, lower inflation perceptions, better loan repayment conditions, and strong satisfaction with infrastructure, all supported by government welfare transfers and public investment,” it said.
The survey also referred to recent research showing rural consumption at its highest level in 17 quarters, reflected in higher real agricultural and non-agricultural wages, increased tractor and fertiliser sales, robust farm credit, healthy reservoir levels, lower input costs, and steady minimum support price procurement. All these factors have supported sowing activity and farm incomes, it claimed.
Drawing on these indicators, the survey said reliance on MGNREGA for employment in rural areas had declined. It noted that person-days of work generated under the scheme fell from a pandemic peak of 3,890 million in 2020-21 to about 1,837.7 million in 2025-26 (up to December 31, 2025), a drop of more than 53 per cent.
“This decline in MGNREGS demand coincides with a decrease in rural unemployment, from 3.3 per cent in 2020-21 to 2.5 per cent in 2023-24, suggesting that many rural households may be accessing nonfarm or other non-MGNREGS work,” the report observed.
It said this trend pointed to an improving rural economy and reduced dependence on MGNREGA. At the same time, it flagged monitoring gaps in several states, including work not being carried out on the ground, mismatches between expenditure and physical progress, the use of machines for labour-intensive tasks, and frequent bypassing of digital attendance systems.
The survey argued that misappropriation had accumulated over time and that only a small share of households completed the full 100 days of work after the pandemic. This, it said, indicated that “while delivery systems improved, the overall architecture of MGNREGA has reached its limits and warrants reassessment in light of evolving rural realities,” it said.
Against this backdrop, the government has enacted the VB GRAMG Act, 2025.
“While MGNREGS achieved significant gains in participation, digitisation, and transparency over time, persistent structural weaknesses limited its effectiveness,” the survey said. It added that the new Act builds on past improvements while addressing shortcomings through what it described as a more modern, accountable and infrastructure-focused framework.
Several experts have challenged the government’s reasoning, warning that removing people from welfare rolls because of name or data mismatches and branding them as “fake” or “fraudulent” is deeply problematic.
Rajendran Narayanan, a faculty member at Azim Premji University, said the Economic Survey appeared to contradict itself. On the one hand, the document states that ‘a range of administrative and technological reforms have enhanced the implementation of the scheme, resulting in notable improvements in participation’. Yet, on the very same page, it claims that ‘these developments reflect a marked improvement in the rural economy… and a reduced dependence on MNREGS as a source of livelihood’. In effect, it argues simultaneously that participation in MGNREGA has increased even as dependence on it has declined, he pointed out.
“The Survey seems to echo the same specious logic as the Union government,” Narayanan said.
He argued that the government had effectively capped employment under MGNREGA by truncating states’ projected labour budgets into arbitrarily approved labour budgets, turning a demand-driven law into a supply-driven one. Narayanan added that wage rates remained below minimum wages in most states and were often delayed, while added digital layers made it harder for workers to access jobs and payments.
“All this has produced what is called a ‘discouraged worker effect’, where people are structurally dissuaded from seeking work under MGNREGA,” he said.
Chakradhar Buddha, a researcher with LibTech India, which works on democratic engagement in rural public service delivery, said similar patterns of exclusion had been seen across schemes such as MGNREGA, Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and the public distribution system.
“This is now being reinforced through claims made in the Economic Survey. Celebrating such exclusions as ‘savings’ legitimises flawed systems, normalises the denial of genuine entitlements, and goes against a rights-based approach to welfare,” he said.