Dismantling MGNREGA would be a historic error: Nobel laureate, academics in open letter to Centre

Nobel economics laureate Joseph Stiglitz and nine other academics on Thursday wrote an open letter to the Indian government saying that repealing the Mahatma Gandhi National Rural Employment Guarantee Act “would be a historic error”.

The letter came on a day when the Lok Sabha passed the 2025 Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Bill to replace MGNREGA. The draft legislation was also cleared by the Rajya Sabha on Friday amid protests by Opposition parties. It awaits presidential assent.

MGNREGA was introduced in 2005 by the Congress-led United Progressive Alliance and aimed at enhancing the livelihood security of households in rural areas. The scheme guaranteed 100 days of unskilled work annually for every rural household that wants it, covering all districts in the country.

While the wage bill for the scheme is borne by the Union government, the states share the cost of materials and administrative expenses.

The new bill proposes increasing the number of guaranteed working days to 125 from 100 and raising the state’s share of the costs to 40%.

Describing MGNREGA as a “landmark legislation”, the academics on Thursday urged the Narendra Modi government to recommit to the Act. MGNREGA “stands as the world’s most significant policy operationalising a demand-driven, legal right to employment”, they said.

The Act being replaced “affirms economic dignity as a fundamental right” and empirical evidence “underscores its impact”, the academics said.

“The early years of the Act coincided with unprecedented rural wage growth, and studies confirmed the program’s positive effects on economic output and efficiency, dispelling myths of unproductivity,” the group added.

They said that chronic underfunding and delay in payments had for long hampered the employment guarantee scheme's implementation.

The signatories added: “The current shift to devolve the scheme to states and without commensurate fiscal support, now threatens its existence. States lack the central government’s financial capacity.”

“The new funding pattern creates a catastrophic Catch-22: states bear legal liability for providing employment, while central financing is withdrawn,” they added. “Previously contributing only 25% of material costs, states now face burdens of 40% to 100% of total costs, ensuring poorer states will curb project approvals, directly stifling work demand.”

The “structural sabotage is compounded by discretionary ‘switch-off’ powers”, the academics said, adding that this would allow the scheme to be suspended and render the guarantee meaningless.

“The unexplained defunding of West Bengal in the last three years exemplifies this political misuse,” they added. “The new framework institutionalises this risk, imposing unfunded mandates on states without consultation.”

In March 2022, the Union government suspended MGNREGA funding to West Bengal, citing widespread irregularities and alleged violations of the scheme’s implementation rules by the state government.

West Bengal received Rs 7,507 crore in the financial year 2021-’22 under MGNREGA but has received no funds in the following three financial years.

On December 5, the Union government told Parliament that it was in the “process of reworking and refining the necessary modalities and procedures” to resume the scheme under the Act in West Bengal.

The signatories said that MGNREGA not only provides wages but also helps build important rural infrastructure such as wells, roads and ponds, and stimulates the local economies. “By making projects financially untenable for states, these multiplier effects are extinguished,” they said.

The signatories also include Olivier De Schutter, the United Nations special rapporteur on extreme poverty, Pavlina Tcherneva, the president and professor of economics at The Levy Economics Institute of Bard College in New York, and Thomas Piketty, the co-director of the World Inequality Lab.

The proposed legislation states that the Union government will determine the state-wise normative allocation for each financial year based on “objective parameters”. It also proposed that only the Union government can notify rural areas in a state where the scheme will be implemented.

As per the bill, the governments in the North East states, Himalayan states (Uttarakhand and Himachal Pradesh) and the Union Territories with legislature (Jammu and Kashmir) will contribute to 10% of the scheme’s funding.

The Centre will bear all costs in Union Territories that do not have a legislature.

The proposed legislation retains the provision that a person is entitled to a daily unemployment allowance if work is not provided within 15 days of applying under the scheme. The cost of the allowance will be borne by the state governments.

Significant rollback of workers’ rights: Right to Food campaign

On Friday, the Right to Food Campaign, a network of activists working on food and nutrition, said that the VB-G RAM G bill marked a “significant rollback of hard-won statutory guarantees” for workers’ rights.

Describing the passing of the bill in Parliament as a “dark day for workers’ rights”, the activists said that repealing MGNREGA “undermines the right to work of people and all principles of decentralisation, community participation and federalism”.

The bill does not reform employment guarantee but destroys it, they said in a statement, adding that by repealing MGNREGA, the Union government had “converted a demand-based legal right to work into a centralised, discretionary, budget-capped scheme, fully controlled by” it.

It claimed that employment was no longer guaranteed by law but was subject to annual allocations, political priorities and fiscal arbitrariness.

“This is a betrayal of rural workers, especially women, landless households, Dalits, Adivasis, and migrants who depend on MGNREGA for survival and dignity,” the activists said.

The statement also said that the Union government’s claim that the proposed legislation signified an improvement from the old Act as it provided 125 days of employment in place of 100 was “just an illusion”.

It added: “Under the MGNREGA, on average only about 50 days of work per household has been provided per household, with the entitlements being undermined through delayed payments, low wages, digital exclusions and so on.”

The activists said that the VB-G RAM G bill makes it worse by including state-wise “normative allocations” imposed by the Union government. Any expenditure above these allocations were to be borne entirely by the state government.

“With such restrictions, the amount of work provided will only decrease further,” they said.

Noting that the fiscal burden on state governments would also increase with the shift to a 60:40 cost-sharing ratio for wages, the activists added that “this changed cost-sharing norms increases the burden on the already fiscally starved state governments and would disproportionately harm poorer states where the capacity to spend is low”.

They also claimed that the bill “systematically erodes” all principles of decentralisation by shifting most decision making powers to the Union government.

Claiming that MGNREGA had also been systematically undermined over the last decade through several administrative interventions, the activists said that what was required was strengthening it by increasing the wage rate, withdrawing mandatory digital attendance and Aadhaar-linked payments, strengthening social audits and empowering local communities, among other such steps.

“Instead, what we have now is the VB-GRAM G which represents a rollback of hard-won workers’ rights, centralises authority, and leaves the most vulnerable behind,” they added.

The statement also claimed that the draft legislation was brought to Parliament in “total secrecy”.

“In flagrant violation of basic democratic norms & provisions of the Pre-Legislative Consultation Policy, the government did not make public the proposed legislation and did not hold any public consultations,” it said.

The activists claimed that the “tearing hurry with which the bill was railroaded through Parliament” prevented any meaningful deliberation and parliamentary scrutiny.

Also read:

• BJP chief ministers wanted MGNREGA to include farm work. Modi government’s bill goes another way
• ‘A bill to destroy MGNREGA’: Why experts fear the worst from new job guarantee bill