New job guarantee scheme aims to fix design gaps in MGNREGA, shift focus to outcomes: SBI Research

New Delhi: India is preparing for a major reset of its rural employment framework, with the proposed Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G), a reworked version of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), aimed at fixing long-standing structural weaknesses while retaining the core promise of employment support, according to a report by SBI Research.

The redesign seeks to turn the scheme away from a purely demand-driven model towards one that places greater emphasis on productive asset creation, outcome-based planning, and accountability at the grassroots level, SBI Research said.

However, at least one expert warned that report was “overly optimistic” about the proposed redesign, and that straying from MGNREGA demand-driven model could lead to increased exclusion rather than better outcomes.

The SBI Research report argued that while budgetary support for MGNREGA has risen sharply over the years—touching a record ₹86,000 crore in 2025-26—outcomes have lagged expectations, particularly in terms of durable asset creation, income enhancement, and efficient utilization of funds.

'Course correction'

VB-G RAM G is positioned as a course correction, with a stronger role envisaged for gram panchayats and a jan bhagidari-led approach to planning and implementation, the report said.

One of the most significant changes proposed is an increase in guaranteed days of employment from 100 to 125, alongside an expansion and rationalization of the nature of jobs permitted under the scheme. The revised framework groups work into four clearly defined categories—water security, core rural infrastructure, livelihood-related infrastructure and climate-resilient infrastructure—to better align public spending with local development priorities. SBI Research noted that this could help narrow the persistent gap between work demanded and work provided, which has averaged around 14% since FY20.

The report pointed to inefficiencies in fund utilization, estimating that in a single year, structural weaknesses and uneven state-level efficiency led to lost employment opportunities for about 12.2 million households, even though funds were available. At the same time, real wage growth under MGNREGA has remained modest, hampering demand for work in several states, while unemployment allowance—though mandated under the Act—has been implemented poorly, with negligible payouts over recent years, it added.

The report also highlighted a significant shift in the proposed funding architecture. While MGNREGA had a 90:10 Centre-state funding pattern, VB-G RAM G proposes a 60:40 Centre-state funding pattern for most states.

'Don't stray from demand-driven model'

While the proposed redesign has been positioned as a necessary course correction, experts have cautioned against moving too far away from the demand-driven ethos of the rural employment guarantee programme.

Ashish Kumar Singh, president of Citizen Forum, a civil rights awareness group in Bihar’s Katihar, said, “The report appears overly optimistic about the proposed redesign. While structural gaps in MGNREGA do exist, shifting to a more normative and outcome-linked framework risks weakening the demand-driven nature of the scheme, which has been its core strength. Increasing complexity in planning, funding and monitoring could disadvantage poorer states and gram panchayats with weaker administrative capacity, potentially leading to exclusion rather than better outcomes.”

States have room to borrow, report says

Addressing concerns that this could strain states’ finances, SBI Research argued that such fears were overstated, noting that most states have under-borrowed relative to their fiscal limits. A simulated allocation exercise suggested states could collectively gain around ₹17,000 crore compared with average allocations over the past seven years, with large states such as Uttar Pradesh and Maharashtra emerging as net gainers, the report said.

The report also contrasted MGNREGA’s relatively weak oversight framework with VB-G RAM G’s proposed use of biometric authentication, spatial technology-based planning, digital monitoring, weekly public disclosures and strengthened social audits. Greater empowerment of gram panchayats is expected to improve planning, reduce misappropriation and ensure that works are better tailored to local conditions, while integration with national platforms such as PM Gati Shakti is aimed at improving coordination and asset utilization, it said.

VB-G RAM G also seeks to address a key implementation gap in the existing law by reforming the unemployment allowance mechanism, SBI Research said. The proposed framework removes the disentitlement clause and embeds unemployment compensation within a time-bound grievance redressal system, making payments mandatory if work is not provided within stipulated timelines.

While acknowledging that MGNREGA has played a critical role in social inclusion—particularly for women and SC/ST households—SBI Research noted that its impact on rural poverty has diminished over time. Against this backdrop, the report positioned VB-G RAM G as a recalibration rather than a replacement, aimed at retaining employment support while delivering stronger outcomes, higher-quality assets and greater accountability in rural development, it said.

Uneven outcomes

The report noted the wide divergence in MGNREGA performance across states, underscoring why a redesign like VB-G RAM G was being proposed. So far in FY26, about 475 million households have worked under MGNREGA nationwide, generating over 1.71 billion person-days, but outcomes vary sharply by state. States such as Uttar Pradesh, Tamil Nadu, Andhra Pradesh, Rajasthan and Maharashtra account for a large share of employment generation in absolute terms, reflecting their scale and rural workforce dependence. Uttar Pradesh alone generated over 185 million person-days, the highest of any state.

However, when measured in terms of average days of employment per household, states such as Kerala (48 days), Jammu & Kashmir (47 days), Jharkhand (42 days) and Odisha (42 days) perform better than several larger states, highlighting differences in implementation efficiency. The data also showed that despite the legal guarantee of 100 days, the national average remained at 36 days per household, reinforcing SBI Research’s argument that the existing framework has struggled to translate allocations into sustained employment.

SBI Research used this state-wise divergence to argue that the current demand-driven model has produced uneven outcomes, with efficiency, planning capacity and governance varying sharply across states. This necessitates the proposed shift under VB-G RAM G towards normative, outcome-linked allocations, greater accountability at the gram panchayat level and stronger monitoring mechanisms, it said.

Women’s participation continues to be a strong pillar of the scheme. Women account for 35.8 million households, or nearly 58% of total workers, with states such as Tamil Nadu, Andhra Pradesh and Rajasthan recording particularly high female participation. However, the number of households completing the full 100 days of work remains concentrated in a handful of states, pointing to structural and administrative constraints elsewhere.

The report suggested that by rewarding efficiency and asset creation, while still accounting for equity factors such as rural population and work demand, the redesigned framework could narrow these inter-state disparities and improve overall outcomes.

The SBI Research report was flayed by a section of experts who had played a role in the architecture of the earlier job guarantee scheme.

“This so-called independent research report is largely parroting the government’s position on what is a deeply partisan redesign of MGNREGA, merely couched in more conciliatory language," said Nikhil Dey, a founding member of the Rajasthan-based Mazdoor Kisan Shakti Sangathan, who was closely involved in the campaign for the enactment of MGNREGA in 2005. "On the one hand, it claims that NREGA has underperformed and needs fixing, but on the other, its own analysis of the last decade highlights major achievements in water conservation, drought resilience and sustained employment generation. These contradictions are never resolved.”

“The report also repeats the government’s narrative on delayed wage payments, despite the Supreme Court clearly holding the Centre responsible, as it pays 100% of wages. Even today, workers across the country are waiting for months for payments for work done last year said Dey, adding that the push towards technology-heavy monitoring, presented as transparency, risks sidelining ground-level planning and social audits that communities had built.

“What is being proposed moves away from decentralized, people-driven development towards a more corporate-oriented framework, weakening panchayat autonomy and worker empowerment. This is not independent research; it is a selective use of data to legitimize what the government has already decided,” he added.