VB-GRAMG Delay Leaves India’s Jobs Safety Net in a Limbo

The nearly two-decade-old MGNREGA, the world’s largest rural job guarantee programme, was officially replaced by the Viksit Bharat Guaranteed Rozgar and Aajeevika Mission – Gramin, or VB-GRAMG, through a parliamentary act in December 2025. Although the legislation envisaged rollout from the current financial year, there are no visible signs of the programme becoming operational yet. On the other hand, the war on Iran has begun to impact the Indian economy, creating a risk of an employment crisis in both rural and urban areas. Historically, MGNREGA served as a vital buffer during such economic shocks, but with that programme repealed and the new one not yet operational, that safety net is currently missing.

Satya N Mohanty, a former secretary in the Government of India and senior advisor on rural development at the erstwhile Planning Commission, spoke to Tracking Trends on the reasons behind the delay in rolling out the new plan and what could be at risk.

Q: The Ministry of Rural Development, in a recent reply to a Parliament question, has said the government is still in the process of finalising the modalities of implementing VB-GRAMG. If the act was passed in December, why has there been such a significant delay in implementing it?

A: While the bill has become an act, it requires subordinate legislation, a specific set of rules framed by the government to operationalise the law. Because VB-GRAMG is a brand-new act, the government must establish entirely fresh criteria based on population metrics, poverty ratios, past utilisation, and standards for asset creation quality. Until these rules are finalised, the programme cannot be rolled out to the states.

At present, any budgetary provisions for MGNREGA are limited to settling pending payments or completing unfinished projects. I also understand that, pending the issuance of new guidelines, the government has decided to follow the old guidelines.

Q: How does the “normative allocation” model of VB-GRAMG fundamentally differ from the “demand-driven” model of MGNREGA?

A: This is one of the most significant structural shifts. MGNREGA was built on a Right to Work architecture, where an individual had a legal right to be provided employment within 15 days of requesting it, or they were entitled to an unemployment allowance. It was an open-ended fiscal architecture, with the Centre funding projects based on local demand.

In contrast, VB-GRAMG introduces a fixed, normative allocation cap, effectively shifting the programme from a demand-led to a budget-constrained framework. When a system moves to normative allocation, the legal Right to Work is effectively diluted because the provision of employment becomes secondary to budgetary limits.

Q: You say the rights framework is being diluted. How does the budget cap translate into that in practice?

A: Under a normative system, the state discharges the Right to Work only within the limits of the available budget. If a state cannot match the 40% funding requirement, it will receive only a proportional amount from the Centre, shrinking the overall pool for job creation.

If actual demand for work exceeds the allocated budget, the excess demand is simply not met. This effectively shifts the Right to Work from being a guaranteed entitlement to a contingent provision.

Q: Is that why even if the act increases guaranteed employment to 125 days from 100, it may not materialise in practice?

A: In a sense, yes. Under MGNREGA, the Centre funded 100% of wages. Under VB-GRAMG, the Centre will provide only 60% of the cost, requiring states to bear the remaining 40%, with an exception for Himalayan and Northeastern states, where the ratio is 90:10.

Given the fiscal position of most states, it is unlikely that they will be able to support employment for 125 days at scale. Moreover, if a state wishes to exceed the normative cap, it must fully finance that excess, which few states are likely to do.

Q: Which states are likely to face the most stress under this new funding structure?

A: The increased financial exposure will likely place pressure on debt-stressed states such as Punjab, West Bengal, Rajasthan, and Kerala. Additionally, high fiscal deficit states like Bihar, Andhra Pradesh, Chhattisgarh, and Madhya Pradesh will face significant stress.

States with limited revenue capacity, which were earlier dependent on central transfers, will be particularly constrained. In contrast, Odisha is relatively better placed given its low debt levels, while Maharashtra, Gujarat, and Uttar Pradesh are in a stronger position due to relatively better fiscal metrics.

Q: How does the new act affect the role of Gram Panchayats in local planning?

A: Although the act technically retains the Gram Panchayat’s primacy, it introduces thematic restrictions. Local plans must align with specified domains such as water security and rural infrastructure.

This represents a form of centralisation, where planning originates locally but is constrained by centrally defined priorities. It risks overlooking local needs, as higher authorities may not fully appreciate the specific requirements of individual villages.

The requirement for higher-level approvals for smaller projects also runs counter to the principle of subsidiarity, potentially leading to delays and reduced local agency.

Q: What are the implications of the 60-day pause in work during agricultural peak periods?

A: This is particularly concerning for rural wages and labour bargaining power. MGNREGA historically acted as a fallback option, preventing wages from being suppressed.

Removing that fallback for 60 days weakens the bargaining position of labour, increasing the likelihood of wage compression. Workers may be compelled to accept lower wages due to the absence of an alternative.

This becomes especially problematic in an inflationary environment, where wage adjustments are necessary to maintain purchasing power.

Q: Is there a broader policy thinking behind replacing MGNREGA?

A: There appears to be a view that welfare spending is inefficient or inconsistent with development priorities. Development is often narrowly defined in terms of GDP growth and infrastructure creation, rather than broader human development indicators.

In this framework, welfare is seen as expenditure rather than as an investment in social stability and economic resilience. There is also a tendency to scrutinise welfare spending more closely than other forms of fiscal expenditure, such as tax concessions or loan write-offs.

Q: What are the risks if the rollout of VB-GRAMG continues to be delayed?

A: The delay creates a period of disruption for vulnerable sections of society. There are already signs of stress in informal sector activity, with the risk of closures and reverse migration.

The absence of an operational safety net at a time of external shocks increases the risk of both rural and urban employment distress. There is a need for urgency in finalising the rules.

A prolonged delay could signal policy drift at a time when timely intervention is critical. That said, I understand that guidelines may be issued shortly, and in the interim, the government may continue to operate under the existing framework.