Answer

Introduction

Enacted in 2005, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is India’s largest demand-driven rural employment safety net, legally assuring 100 days of work per household annually. It serves as a crucial buffer for livelihoods, stabilising rural incomes, cushioning inflation shocks, and sustaining consumption during job losses. In June 2025, over 27.59 million households sought work under the scheme, reflecting rising rural distress and its continued role in economic resilience.

Role of MGNREGA in Sustaining Rural Livelihoods

• Income Cushion During Crises: Provides wage employment when other sources fail, ensuring consumption continuity.
  Eg: During the COVID-19 pandemic, MGNREGA absorbed a large number of returning migrant workers, providing them with income opportunities.
• Stabilises Rural Consumption: Regular income from MGNREGA fuels rural demand and supports local markets.
• Supports Marginalised Groups: Offers employment to women, SC/STs, and landless labourers in remote areas.
  Eg: The Act  mandates at least one-third of beneficiaries are women, promoting gender equity and empowering women in rural areas.
• Strengthens Natural Resource Base: Works on water conservation, afforestation, and soil health improve long-term rural resilience.
  Reduces Distress Migration: Availability of local jobs curbs rural-urban migration for low-paying, insecure work.

Challenges Post-Cap Introduction on its demand-driven character and overall effectiveness

• Funding Limitation: The 60% spending cap for the first half of the financial year 2025-26 restricts the scheme’s ability to respond to actual demand, potentially leading to unmet employment needs.
• Legal Concerns: The cap may violate the legal entitlement under MGNREGS, as it could prevent the government from fulfilling its statutory obligations.
• Delayed Wage Payments: The cap could lead to delays in wage disbursements, affecting workers’ livelihoods.
• Implementation Challenges: State governments may face difficulties in planning and executing projects due to funding uncertainties.
• Reduced Rural Employment: The cap may limit the number of workdays available, reducing overall rural employment opportunities.
• Increased Rural Distress: The cap exacerbates rural distress by limiting employment opportunities during critical periods.
• Political Backlash: The decision has faced criticism from political parties and civil society organizations, alleging undermining of rural welfare.

Suitable Way Forward

• Enhanced Budget Allocation: Increase the annual budget for MGNREGA to accommodate rising demand and ensure timely wage payments.
  Eg: The World Bank recommends allocating 1.7% of GDP to MGNREGA to maintain employment levels and meet statutory obligations.
• Flexible Funding Mechanism: Implement a flexible funding mechanism that allows expenditure based on actual demand, maintaining the scheme’s demand-driven nature.
  
• Legal Safeguards: Ensure that any policy changes comply with the legal provisions of MGNREGA and do not infringe upon workers’ rights.
• Transparency and Accountability: Strengthen mechanisms for transparency and accountability in fund utilization to prevent misuse and ensure effective implementation.
  Eg: Digital initiatives like geo-tagging of assets and the JANMANREGA mobile app have improved monitoring and citizen oversight.
• Stakeholder Engagement: Engage with stakeholders, including state governments and civil society organizations, to address concerns and improve the scheme’s effectiveness.

Conclusion

MGNREGS remains a vital pillar for rural employment security, although its 60% spending cap risks undermining its demand-driven design and effectiveness. Ensuring adequate funding, timely disbursal, and flexible implementation is essential to protect livelihoods and uphold the scheme’s constitutional and developmental intent.

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