Opinion MGNREGA needs reform but changes fray the safety net
The problem with Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) is poor fiscal design that burdens the states unduly
The problem with VB-G RAM G, however, is poor fiscal design that burdens the states unduly. 
There are political overtones to the Narendra Modi government’s move to repeal the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and introduce the Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission Grameen (VB-G RAM G) Bill to replace it. The proposed law aims at providing 125 days of guaranteed wage employment in a financial year to every rural household whose members volunteer to undertake unskilled manual work. This is more than the 100 days under the previous UPA dispensation-enacted MGNREGA. VB-G RAM G further imposes curbs on taking up works during the peak agricultural sowing and harvesting season covering a 60-day notified period. That — and the deployment of technology, from biometric authentication, global positioning system and mobile-based worksite monitoring to AI for fraud detection — is welcome.
The Modi government can claim credit for having generated a record 389 crore and 364 crore person-days of employment under MGNREGA during the Covid years of 2020-21 and 2021-22 respectively. The scheme delivered when it was needed most, thanks to both enhanced budgetary provision and efforts at ensuring that the money spent reached the intended beneficiaries.
The problem with VB-G RAM G, however, is poor fiscal design that burdens the states unduly. In MGNREGA, the Centre meets the entire cost of wage payment and up to 75 per cent of the material component outgo in works. The VB-G RAM G Bill proposes a 60:40 Centre-state fund-sharing pattern; only the North-east and Himalayan states will have 90 per cent central funding. Given the tight fiscal position of most state governments and the shrinking of their fiscal powers, they will struggle to foot their 40 per cent share. It could create a situation similar to the Pradhan Mantri Fasal Bima Yojana, where the failure of many states to make timely payments of their 50 per cent premium subsidy share has led to its suboptimal performance. Ideally, the Centre should have only a few flagship schemes that it should fund substantially, if not wholly. PMFBY and MGNREGA/VB-G RAM G are among such schemes — especially in the most backward states with weak fiscal capacity. But the problem is not just fiscal. Earlier, the scheme envisaged a bottom-up approach wherein states would estimate the demand for work and share it with the Centre. Based on this, the Centre would make allocations. In the new Bill, this approach has been flipped, with the Centre providing “normative” allocation based on parameters that it will decide. That is a misstep.
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