MGNREGS failing the rural poor?
![MGNREGS failing the rural poor?](https://cdn.finshots.app/images/2025/01/MGNREGAV2.jpg)
In today’s story, we tell you why the world’s largest employment guarantee scheme is facing some serious challenges and if there’s a way out.
The Story
One hundred days of guaranteed employment. This was the ambitious promise of the Mahatma Gandhi National Rural Employment Guarantee Scheme or what we call MGNREGS for short. The government introduced it in 2005 to provide a safety net for rural adults willing to undertake unskilled manual work.
The premise was simple yet profound. People ready for such work will get a job within 5 kilometers of their residence. And if work isn’t provided within 15 days, they’re entitled to an unemployment allowance. Payments were also deposited directly into bank accounts within a week of completing the job.
But the scheme wasn’t solely about providing guaranteed employment. MGNREGS aimed to create lasting infrastructure in rural areas. Think roads, canals, ponds, and toilets. Basically projects that could uplift villages and improve lives. And for a while, it worked wonders.
The rural poor didn’t necessarily have to migrate to the nearby urban centres to look for work since they were getting a decent wage back home. With one-third of the jobs reserved for women, it also empowered rural households with an extra income stream and a sense of independence. And with slightly more money, rural economies thrived. Households had more money to spend. There was hope.
But over time, the cracks began to appear which were hard to ignore.
Budgetary allocation, the lifeline of the scheme, consistently fell short. As recently as January 2025, the government hasn’t been able to release ₹4,315 crores for wages or even allocate an additional budget despite approving an order to transfer the money. And this shortfall isn’t new. In FY22, MGNREGS’ budget was just 0.4% of GDP, shrinking to a paltry 0.2% by FY25. Compare that to the recommended 1.2-1.5%, and the gap becomes glaring. Without timely funds, workers are left unpaid and are strayed away from the scheme. In Kollam, Kerala, for instance, delayed payments totaling ₹40 lakhs have plunged hundreds of workers into financial distress.
Then there’s the Aadhaar-Based Payment System (ABPS) which was made mandatory starting January 2024. While it was implemented with the objective of keeping things transparent, it surely backfired. Discrepancies between Aadhaar and job card details have left many workers unpaid due to failed authentication. Others had their Aadhaar linked to the wrong bank accounts, causing payments to be diverted to unintended recipients. To add to it, rural workers often struggle with accessing digital platforms needed to verify their Aadhaar and receive payments.
Technology was supposed to enhance the scheme, but that has created hurdles too. You could look at the National Mobile Monitoring System (NMMS) app which requires workers to upload geo-tagged photos from worksites for attendance. In theory, it’s a good idea. But in practice, it’s a nightmare. Many rural workers don’t own smartphones capable of running the app. Poor internet connectivity in villages only adds to the problem. And even when everything aligns, the app itself often crashes or faces server errors, leaving attendance records incomplete and payments delayed.
Plus, corruption continues to plague the system. In January 2025, the All India Agricultural Workers Union (AIAWU) staged a protest in Kalaburagi, Karnataka, accusing officials of creating fake job cards and falsifying attendance records to siphon off funds meant for rural workers in the area.
And lastly, there’s the issue of wages themselves. The measly wages simply don’t keep up with the cost of living. Haryana has the highest wage for unskilled workers under the scheme at ₹374 a day, while Arunachal Pradesh and Nagaland have the lowest at ₹234. For many, these amounts barely cover basic necessities. Just think about it. A simple home-cooked veg thali costs about ₹32. So, if you consider three meals, nearly half of a day’s earnings might feed just one person, leaving little to nothing for the rest of the family. Forget about other necessities or savings. That makes the scheme less attractive for those who once relied on it.
So yeah, the scheme, touted as the biggest employment scheme in the world, is no doubt littered with challenges.
What’s the way out, you ask?
Well, the Parliamentary Standing Committee on Rural Development and Panchayati Raj proposes a few urgent fixes.
First, they recommend linking MGNREGS wages to an inflation index to ensure they reflect the rising cost of living. They also suggest delaying the mandatory Aadhaar-based payment system until its implementation issues are resolved. These measures, combined with adequate budget allocations, could breathe new life into the scheme.
Critics of MGNREGS have long argued that the program is wasteful, ineffective and inflationary. They believe that the assets created are of poor quality and that funds would be better off if spent on skill development or private-sector job creation. While there’s some merit to these arguments, the immediate issues facing MGNREGS are far more pressing.
So yeah, that’s the long and short of it.
Our take? Well, the government needs to act swiftly, budget the payment outflows and prioritise timely fund releases. After all, MGNREGS is a demand-driven program. When more people seek work under it, funds must follow. Delaying this not only leaves millions of rural poor stranded but also throws the entire budget into disarray, risking further inequities and inefficiencies.
Hopefully, the government has a plan in place to ramp up these solutions. Because the rural poor can’t afford to wait indefinitely for solutions.
For now, the world’s largest employment guarantee scheme stands at a crossroads.
Until then…
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