Why A Scheme Modi Called a ‘Monument of Congress Failure’ Is Now Being Replaced

Manmohan Singh, who spearheaded the neoliberal turn in India, also presided over the enactment of laws that ran counter to neoliberal logic. Flagship legislations of the UPA governments—such as the MNREGA, the RTI Act, and the Right to Food—expanded the state’s welfare and accountability obligations. Over time, however, the RTI in particular has been systematically weakened by successive regimes that were deeply sceptical of transparency. With the amendment replacing MNREGA, many suspect that the employment guarantee law will be rendered ineffective.

The Amendment

“I keep hearing talk that the government is planning to scrap MNREGA, or already has. I know that you doubt my experience in many areas but I am sure you will admit that I have political acumen. My political acumen tells me that MNREGA should not be shut down. I will not make such a mistake because MNREGA is a living monument of your failures. Sixty years after independence, you still have to send people to dig holes. So I will celebrate this with pomp and splendour. I will tell the world that these holes you are digging are for your own sins”

Prime Minister Narendra Modi made this remark in the Lok Sabha in February 2015, emphatically ruling out discontinuing MNREGA and ridiculing the Congress. Yet a decade later, in his third term, the government is effectively moving to replace the very Act he once described as a “living monument” to the Congress’s failures.

Viksit Bharat — Guarantee For Rozgar And Ajeevika Mission (Gramin)” (VB-G RAM G) Bill is going to replace the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA). Alongside the name change, the government is proposing fundamental and structural changes in the Employment Guarantee Act. The new bill says this will be a centrally sponsored scheme. This would entail the state government bearing 40 per cent of the labour cost. In the existing act, this was borne entirely by the union government. The state government bore only 25 per cent of the material cost. According to the VB-G RAM, the G Bill “the fund-sharing pattern between the Union government and the State governments shall be 90:10 for the north-eastern States, Himalayan States/Union Territories (Uttarakhand, Himachal Pradesh, and Jammu and Kashmir), and 60:40 for all other States and Union Territories with legislature.”

The proposed new law increases guaranteed employment to 125 days from the current 100. However, this apparent expansion is accompanied by fundamental structural changes. Allocations will now be capped within a fixed budget determined by the Union government, and employment will be restricted to rural areas notified by the Centre.

Why replacement instead of amendment?

This marks a sharp departure from MNREGA’s original design as a demand-driven programme, where budgets could be expanded in response to need. Section 4(5) of the proposed law states: “The Central government shall determine the State-wise normative allocation for each financial year, based on objective parameters as may be prescribed by the Central government.” In effect, this provision ends the programme’s demand-based character.

The bill seeking to replace the MNREGA Act fundamentally alters a law that has benefited millions of rural workers over nearly two decades. While the text claims that the scheme will remain demand-driven, other provisions render it effectively supply-driven. It also shifts significant financial responsibility onto the states and removes Mahatma Gandhi’s name from the programme—an omission critics argue reflects the BJP’s ideological position. Crucially, the replacement bill no longer guarantees employment as a legal right.

Instead of amending the existing law—a route typically used to adapt older legislation to new challenges—the government has chosen outright replacement. Rajya Sabha MP and CPI National Secretariat member P. Santhosh Kumar sees this as politically motivated.

“The Modi government’s intention to replace Mahatma Gandhi is reflected in this replacement bill more than in anything else,” he says. “If they had wanted to introduce changes, they could have proposed an amendment. MNREGA is the most popular central government scheme and has changed the lives of millions. The RSS does not want this programme to continue in its present form—especially with Mahatma Gandhi’s name, whose ideology remains anathema to the Sangh Parivar.”

Economist Jean Dreze had noted in an article that MNREGA has typically generated between 200 and 300 crore person-days of employment annually. Employment rose sharply during two major crises: in 2009–10, following the global financial crisis, and between 2020 and 2022 during the COVID-19 pandemic.

“This illustrates an important aspect of MNREGA—its countercyclical role,” Dreze argues. “During the COVID-19 crisis, MNREGA provided critical fallback employment for unemployed workers and returning migrants.”

MNREGA was rolled out in phases: first in 200 districts on February 2, 2006; then in another 130 districts in 2007; and finally extended nationwide on April 1, 2008.

NDA &  the MNREGA

After the Modi government assumed office in 2014, MNREGA employment fell by nearly 25 per cent in its first year. Dreze attributes this decline to the NDA government’s hostility towards the scheme, including a short-lived attempt to restrict it to selected districts.

Economist Dr R. Ramakumar of the Tata Institute of Social Sciences sees deeper fiscal motives behind the proposed replacement.

“There were earlier reports that the Finance Commission might reduce the divisible pool of tax revenue from 41 per cent to 37 per cent, but recent indications suggest it has been forced to retain the 41 per cent share,” he says. “One reason for replacing MNREGA could be to shore up resources for the Union government. Under the new Act, states will also be required to spend 60 per cent on labour costs and 25 per cent on material costs. This fiscal reasoning, combined with political considerations, likely drove the move to overhaul the law.”

A government panel constituted in 2022 by the Ministry of Rural Development had recommended a comprehensive overhaul of the Mahatma Gandhi National Rural Employment Guarantee Scheme. The current move to replace the law must be read in this broader context of reworking rural labour relations.

Sudha Menon, a Gujarat-based researcher on labour and employment, argues that MNREGA fundamentally altered the rural wage structure. “The scheme substantially increased wages for unskilled workers,” she says. “Large landowners have repeatedly complained that labour became scarce or that they were forced to offer higher wages.” According to her, the proposed replacement of the Act—beyond its ideological motivations—also reflects an attempt to roll back these gains and realign policy in favour of dominant landowning classes.

The Mahatma Gandhi National Rural Employment Guarantee Act, enacted by Parliament in 2005, was inspired by the Employment Guarantee Scheme (EGS) first introduced by the Maharashtra government in the early 1970s. Launched between 1972 and 1974 in response to severe drought, famine, and widespread rural poverty, the EGS was India’s first statutory programme to recognise the right to work by guaranteeing employment at a stipulated wage.

Drawing on this experience, the Congress party committed to a nationwide employment guarantee scheme in its 2004 election manifesto, leading to the enactment of MNREGA. Nearly two decades later, the proposed replacement of the Act marks a significant shift in the legal and policy framework governing employment guarantees in rural India.