DM Deshpande
A new bill by name Vikisit Bharat Guarantee for Rozgar and Ajeevika Mission Gramin (VB-G RAM G) has been passed by both the houses of Parliament amid opposition’s protest.
The bill seeks to replace the two decade old Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA.) The existing scheme has been hailed at international level for providing one of the biggest social security cover in the world.
The political opposition parties are upset with the new Bill mainly on two accounts- one, it drops the name of Mahatma Gandhi, the father of the nation and two it puts additional financial burden on the states and union territories. While the first one is an ideological change, which certainly is by no means less important, the second relates to states’ finances. This article focuses on the economic and structural change in the scheme. It does impact centre- state relations and the federal character of Indian polity.
The new scheme seeks to increase the job guarantee of every rural household from the current 100 days to 125 days. Expanding the scope and depth of coverage of the social cover is indeed laudable in view of widespread distress in large parts of rural India. However, the ground reality is that there aren’t many takers for the scheme as rural wages have risen briskly in most parts of the nation.
Even during Covid 19 pandemic year of 1920-21, according to the employment data, just 9 per cent of the households (that is 7.2 million families) were given a full 100 days of work. This has now further shrunk to only seven per cent of the families getting the full quotes of work. The added benefit of 25 days of work comes with strings attached; now the states will bear the financial burden in the ratio of 60:40.
The north-eastern and Himalayan states are an exception to the general rule with the centre sharing a higher burden of 90 per cent. This is a huge change as currently the states bear only 25 per cent of the material cost of projects undertaken under the scheme with the wage cost being borne entirely by the centre. The shift is from a fully centrally sponsored scheme to the one now shared by both states and the centre. There is no change in the status of unemployment allowance which will continue to be borne by states.
Barring a few fiscally strong states, others are weak. It is not proper to place all of them in the same bracket. In any case, the capacity of the centre to shoulder the burden of a large social coverage scheme is far higher than the states. With the ushering in of the pan India GST regime, states have surrendered their rights to levy various taxes to the Centre. While GST revenues are virtually giving a bonanza to the centre, some states nurture a feeling that they are not getting their rightful share.
The existing employment scheme has been hailed because it is demand driven. The centre was bound to allocate more funds if there was more demand for work. Under the new bill, it changes to a supply driven model wherein the centre would determine state wise normative allocation for every financial year. If a state spends more, it will have to bear additional costs.
The centre gets ‘switch off’ powers which are prone to political misuse. The defunding of the scheme for the last three years to West Bengal is a case in point. As states are called upon to bear a higher burden, weaker states may not approve several projects as they are caught in Catch 22 situation. If they cut short on public works, it would mean that they have to pay out a higher amount of unemployment allowance. Economists are worried that in practice, this may translate into a virtual cap on an important piece of social security cover which is meant for the poor in rural regions.
A welcome feature of the new Bill is that it imparts some flexibility to states. They can notify a maximum of 60 days in a year when no public work is undertaken. Farmers have been complaining for long about wage increases and labour shortages during peak harvest seasons. Now, this clash is sought to be addressed. During critical farm operations, it was observed that the wage inflation was causing a concern both for farmers as well as for the economy. This new feature would now help to curb food production costs.
The new bill is an attempt to give a structured plan to the guarantee scheme. While several scattered and often unrelated works were undertaken, the new bill focuses on four priority areas and aligns rural infrastructure building to national needs. In two decades the rural landscape has undergone phenomenal changes. Mainly, there is a sharp fall in poverty levels from 25.7% in 2011-12 to 4.86% in 2023-24. Not only has consumption gone up in rural areas, there have been structural changes too in livelihoods. Under the new bill, digital transfers and weekly payments are mandated; this will curb corruption and long payment delays. In 2024-25 misappropriation was estimated at Rs.193.67 crore across states and union territories. The experience of direct benefit transfers shows that middlemen are eliminated.
The MGNREGA has cut across party lines and has been universally acclaimed for innovative design and comprehensive coverage. Some of its features are upholding right to work, institutionalising grass root democracy and nurturing the state-central relations on sound principles.
The new bill seeks to modernise and make the scheme robust and relevant to current needs. Ideally, issues pertaining to the changes should be sorted across the table by the center and states. It is time for centre to show statesmanship quality and vow to work together to achieve goals of viksit Bharat.
The author has four decades of experience in higher education teaching and research. He is the former first vice-chancellor of ISBM University, Chhattisgarh
