India’s Rural Lifeline Needs a Lifeline

The Mahatma Gandhi National Rural Employment Guarantee Scheme is too vital to be so neglected.

India’s countryside, once the fount of its civilisational vitality, still houses 65 percent of its people and supports 47 percent through agriculture. Despite rapid urbanisation, rural India remains the republic’s economic and moral backbone. Yet, its vast landscape is increasingly dotted with evidence of administrative neglect. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), once hailed as a revolutionary scheme for alleviating rural distress, now risks becoming a ghost of its former self - underfunded, underdelivered and underwhelming in impact.

This is not for want of money. The Ministry of Rural Development was allocated Rs. 1.90 trillion in the 2025–26 Union Budget - a rise of eight percent from the previous year and a healthy twelve percent annual growth since 2012–13. MGNREGA alone accounts for 45 percent of this budget. At its core, the scheme promises up to 100 days of unskilled wage employment per rural household per year. It has done more than merely provide income, functioning as an informal shock absorber for India’s agrarian economy, especially during lean seasons and post-harvest lulls.

During the COVID-19 pandemic, when millions of migrant workers trudged back to their villages, MGNREGA became a lifeline. The government allocated over Rs. 1 trillion for it, and person-days of employment surged to an all-time high of 389 crores in 2020–21. Even today, with economic recovery well underway, the scheme remains relevant with 312.18 crore person-days generated in 2024–25, supporting nearly 6 crore rural households and over 11 crore active workers. But cracks are showing.

The average employment provided in 2024–25 was just 45 days - far short of the 100-day guarantee. In industrially lagging states like Mizoram and Ladakh, the average was 81 and 65 days respectively. But richer states such as Maharashtra, Gujarat, and Haryana fared poorly, failing to leverage their stronger fiscal capacity. Wage levels under the scheme remain another sore point. In 11 out of 30 states and Union Territories, they fall below the minimum notified wages, despite clear recommendations by a parliamentary standing committee in 2022 to peg MGNREGA wages to national inflation indices. That advice still gathers dust.

Compensation for delays and unemployment allowances under MGNREGA remain largely undelivered. By January 2025, only 26 percent and 24 percent, respectively, had been paid. Just three states - - Uttar Pradesh, Odisha and Assam - made any unemployment payments, with national disbursals rarely exceeding 10 percent since 2020. Meanwhile, only 56 percent of India’s 2,68,919 Gram Panchayats conducted social audits in the past year, revealing weak institutional oversight and limited capacity for reform.

Political friction adds to the malaise. The Economic Survey of 2023–24 rightly pointed out that a strong centre-state partnership is vital for MGNREGA’s success. Yet in practice, ideological clashes often trump governance. West Bengal is a striking case: the scheme has been entirely suspended in the state owing to a bitter spat between state and central authorities. Such brinkmanship only harms the most vulnerable.

The government’s own standing committee proposed extending guaranteed work to 150 days. That too has gone ignored. Meanwhile, many states, instead of strengthening MGNREGA, have launched populist welfare schemes like Ladli Behena, targeted more at political optics than systemic reform.

A way forward lies in demanding greater fiscal responsibility from states, which contribute just 10 percent to MGNREGA yet show little initiative. Making them true stakeholders could boost accountability. The scheme must also move beyond manual labour—upskilling even a fraction of its 11 crore workers could be transformative. The private sector, through CSR and laws like the Apprentices Act, can help. As seen during the Agniveer rollout, businesses are willing to hire trained recruits; a similar model could uplift rural employment.

Even Prime Minister Narendra Modi has voiced concerns about the scheme’s execution. But as India marches towards its goal of becoming a developed nation by 2047, such schemes must become central to the development agenda. India’s per capita income remains just one-fourth of what is required to reach that goal. MGNREGA, implemented effectively and innovatively, can be a bridge to inclusive growth.

The rural poor deserve more than lip service. If India truly wants to lift its villages into the 21st century, it must stop treating MGNREGA as a relic and start treating it as the foundation it was meant to be.

(The author is a Chartered Accountant with a leading company in Mumbai. Views personal.)