India Explained
RepealedINCManmohan Singh, coalition government

Mahatma Gandhi National Rural Employment Guarantee Act (2005) and its replacement in 2026

The 2005 Act gave rural households a legal right to at least 100 days of unskilled wage work a year. It was repealed from 1 July 2026 and replaced by the VB-G RAM G Act, which provides 125 days.

Rural employment

Facts

  • The scheme was notified in September 2005 (the exact day, 7 September, is from memory and not confirmed in the sources reviewed) and guarantees at least 100 days of wage work per financial year to rural households whose adult members volunteer for unskilled manual work [1].
  • In 2020-21, 755 lakh households were provided employment and 72 lakh households completed 100 days; delay compensation is 0.05% of unpaid wages per day [1].
  • For 2023-24 the Union budget allocated Rs 60,000 crore against a departmental proposal of Rs 98,000 crore; the 2022-23 revised estimate was Rs 89,400 crore [2].
  • As of November 2023, 14% of job card holders were not Aadhaar-enabled, and 32% of gram panchayats were audited in 2023-24 [2].
  • In December 2025 Parliament enacted the Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 (VB-G RAM G); the Economic Survey 2025-26 states it replaced MGNREGA [3].
  • The government notified commencement of VB-G RAM G for 1 July 2026, from which MGNREGA stands repealed; the new Act provides 125 days a year, funding in a 60:40 Centre-State ratio (90:10 for North-Eastern and Himalayan States), and unemployment allowance [4].

Why

Reasons given by those who did it

  • PRS summarises the 2005 scheme as a statutory guarantee of at least 100 days of wage employment to rural households that seek it [1].
  • For the 2026 replacement, the Union government stated that the new Act will strengthen livelihood security, improve income stability and support rural consumption, with works focused on water security, core rural infrastructure, livelihood infrastructure and climate resilience [4].
  • The Economic Survey 2025-26 (Box XIII.1) lists what it describes as weaknesses of MGNREGS: scattered categories of works, funding that was 'unpredictable', and no statutory pause window in peak farm seasons [3].

Criticism of that reasoning

  • Opposition members of Parliament, including Mahua Moitra and Jai Prakash Agarwal, argued that the 2025 Act converts a demand-driven right into a supply-driven scheme, shifts cost to States by lowering the Centre's share, and removes Mahatma Gandhi's name, as reported by The Wire [5].

Benefits and concerns

Benefits (2)

  • Large reach among rural households and a legal entitlement to work on demand.755 lakh households received employment in 2020-21 (PRS summary of the Standing Committee report) [1].
  • Evidence of income gains and wage effects in a randomised evaluation of improved implementation.Muralidharan, Niehaus and Sukhtankar (2022 version): an implementation reform in Andhra Pradesh raised beneficiary households' earnings by 14% and reduced poverty by 26%, with 86% of the income gain from non-programme earnings such as higher private-sector wages. The study evaluates a smartcard payment reform of the scheme, not the Act as a whole [6].

Concerns (2)

  • Budget and payment constraints limited delivery of the guaranteed days.Only 72 lakh of 755 lakh households (about 10%) completed 100 days in 2020-21 [1]; the 2023-24 allocation was Rs 38,000 crore below the proposed demand [2]; delay compensation approved in 2022-23 was Rs 94 lakh against Rs 59 lakh paid [2].
  • Administrative and technology requirements, and the audit record, drew committee criticism.The Standing Committee (8 February 2024) asked to avoid mandatory Aadhaar compliance until the mechanism is 'foolproof', noted that wage rates used a 2010-11 base, and recommended raising the guarantee to 150 days; only 32% of gram panchayats were audited in 2023-24 [2].

Evidence points

+13.0
points, mean of two scorers (scale −25 to +25)
+13 to +13
range between the two scorers' totals
Medium confidence
scorers agree within 1 point on every criterion
ReachHow many people did the action materially affect?
Mean +5.0A +5B +5
Outcome evidenceDo official or independent data show the intended result (or its opposite), compared with the era baseline and peers?
Mean +3.0A +3B +3
Cost and sustainabilityIs the fiscal cost proportionate, and is the effect durable?
Mean +1.0A +1B +1
Process and rightsWas it made with debate, consultation and legal soundness, and did it respect rights and court rulings?
Mean +2.0A +2B +2
DeliveryWas it implemented as announced, on time and at scale?
Mean +2.0A +2B +2

Positive meanNegative meanScorer AScorer B

Scorer A. A randomised evaluation found gains in earnings and poverty, but only about 10% of households completed 100 days and budgets fell short of demand.

Scorer B. Reached about 755 lakh households with measured income gains, but only about 10% completed 100 days and the Act was replaced in 2026.

Context used when scoring

Era baseline
Before 2005 rural public works were budget-limited schemes without a statutory right to work; rural poverty and wage levels in the mid-2000s were the policy context.
Lag before outcomes show
3 years
Shocks considered
covid-2020 (demand surge), 2025-26 repeal and replacement
Uncertainty
Medium confidence. Scorer totals are +13 and +13. How uncertainty is shown.

In depth

The Act turned rural public works into a legal entitlement: any rural household whose adult members asked for unskilled work was to be offered it, up to a limit per household per year, with wages paid directly. The scheme became one of the largest public works programmes in the world by households covered, and demand rose sharply in 2020-21.

Evaluations vary in what they measure. One randomised study found that an improvement in payment delivery raised incomes and rural wages in Andhra Pradesh. Standing Committee reports record shortfalls between demand and allocation, delays in wages and compensation, and uneven social audits. The proportion of households reaching the 100-day limit was much lower than the number employed.

In December 2025 Parliament replaced the Act with a new law that raises the limit to 125 days, introduces State-wise normative allocations and a seasonal pause window, and changes the cost-sharing ratio. The Union government presented these as corrections to design weaknesses; critics argued that a demand-driven right had become a supply-driven scheme and that States would carry more cost. The new Act took effect on 1 July 2026, so evidence on its operation is not yet available.

Sources

Last reviewed .Report an error orchallenge a score.

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