50 pc drop in VB-G RAM G: ‘Financial stress on states, pause option to blame’

The 50 per cent drop in rural employment under the VB-G RAM G scheme in July 2026 isn’t a statistical aberration, say experts. The sharp year-on-year fall of person-days under the MGNREGA successor could be a combination of administrative changes, the new Centre-state funding arrangement that puts more stress on cash-strapped states and, more significantly, the pause implemented by several states, says Professor Santosh Kumar Mehrotra, visiting professor at the University of Bath and an expert in developmental economics.

Issues at play

Stating that the demand for rural employment should actually be higher because of the increase in the number of people dependent on agriculture, Mehrotra said the larger structural problem is the inability to create enough non-farm employment. In his view, the resulting pressure on state finances is also connected to the growing use of cash transfers and other welfare commitments. He argued that when states are already financially stretched, asking them to provide 40 per cent of the wage budget upfront creates a difficult situation.

Also read: VB-G RAM G wages: Has Tamil Nadu been ‘penalised’ for its performance?

He also questioned the promise of increasing guaranteed employment from 100 to 125 days. He pointed out that the national average under MGNREGA had never come close to 100 days, with the average generally around 50 days. In that context, he suggested that the increase to 125 days could create an impression of greater generosity without necessarily corresponding to actual employment generation.

Rise in job seekers

Mehrotra, however, stressed that the importance of the employment guarantee has increased rather than diminished. He pointed to a sharp rise in the number of workers dependent on agriculture over the past few years.

According to Mehrotra, the number of workers dependent on agriculture rose from around 200 million in 2019 to about 280 million over the following four years. Even after a subsequent decline, he said, the number remains substantially higher than before the Covid period.

Mehrotra, a former JNU professor, gave his opinion during a discussion on the scheme and whether the decline in employment figures reflects temporary implementation issues, changes in Centre-state financing, seasonal pauses, or deeper structural problems in the new framework. Siraj Hussain, former secretary in the Ministry of Agriculture and the Ministry of Food Processing Industries, and Nikhil Dey, a leading voice on rural employment and the MGNREGA movement, also participated in the discussion.

‘States may not be fully geared’

The discussion began with the July 2026 figures showing a roughly 50 per cent month-on-month drop in the scheme compared with July 2025 in rural employment under the new scheme.

Also read: VB-G RAM G Act takes effect from July 1, guarantees 125 days of rural employment

Hussain said one important change is that states can notify periods covering peak agricultural sowing and harvesting seasons during which workers cannot seek employment. Since kharif sowing is underway, he said, this could partly explain the fall recorded in July.

He also cautioned that July was the first month of implementation and that several states may not yet have fully geared up to provide employment under the new system. In some states, budgetary allocations may also have been made later, affecting implementation.

States under pressure

Mehrotra highlighted two major changes under VB-G RAM G. One allows the scheme to be paused for two months in a year, while the other changes the financial burden shared between the Centre and states.

He said seven states paused the scheme in July, including Bihar, Odisha, Gujarat and four northeastern states. He argued that the pause in major states with large rural labour forces could explain part of the decline in employment generated during the month.

The second change is the increased state contribution. Under the new arrangement, states are required to bear 40 per cent of the funding, compared with the earlier arrangement under which the Centre bore the entire labour component.

Mehrotra said this creates an additional burden for states already facing financial constraints.

Is budget translating to spending?

Hussain agreed that the financial change is significant but said the evidence available from some states indicates that governments are making budgetary provisions. He cited West Bengal, Bihar, Tamil Nadu and Uttar Pradesh as states that have made allocations.

Also read: MGNREGA vs VB-G RAM G: What changes for states and workers | Interview

At the same time, Hussain cautioned that budgetary allocations do not necessarily translate into actual spending. State budgets can be overstated, and releases may depend on decisions taken by finance departments.

Implementation question

Dey offered a substantially more critical assessment of the decline. He argued that the government had several months to prepare for the transition because the repeal of the earlier framework took place in December and the period from January to June was available for preparation.

According to Dey, the decline had already begun in January. He said the data showed a fall of about 38 per cent by June compared with the previous year, making the July decline part of a broader trend rather than an isolated first-month effect.

Dey also focused on the requirement that states contribute 40 per cent upfront. He argued that cash-strapped state governments have little incentive to generate employment if doing so requires them to commit significant funds.

Also read: Why VB-G RAM G raises fears over future of rural jobs in Andhra Pradesh

He disputed the argument that the new promise of 125 days of employment automatically translates into greater work being provided. According to Dey, the allocation announced by the Centre is dependent on states contributing their share and implementing the law.

For him, the most important measure is not the amount announced in the budget but the actual number of days of employment provided to workers.

Is reform failing?

Hussain was asked whether the new framework could be viewed as being designed in a way that makes failure more likely.

He said it was too early to reach that conclusion and argued that states would come under pressure to provide their share. However, he acknowledged that whether the money would actually be utilised to generate the promised employment would have to be monitored.

He also noted that the Centre had increased the state share in several centrally sponsored schemes in the past. Referring to changes made in 2015-16, he said state contributions had been increased substantially across schemes before being revised following consultations.

For Hussain, the immediate issue is therefore implementation: whether states make the required allocations and whether those allocations translate into actual work.

Dey, however, argued that the financial structure itself creates a problem because the law places the implementation burden on states while requiring them to contribute financially.

Digital attendance

Another major concern raised by Dey was the use of technology in monitoring workers.

He pointed to the requirement for live facial-recognition photographs to be taken twice a day from geo-tagged and geo-fenced locations. He argued that such a system could create difficulties in rural areas with weak internet connectivity.

Also read: Why MGNREGA, in G Ram G avatar, could be new pain point in Centre-state ties

Dey said workers could end up working but not receiving wages if their attendance is not successfully recorded. He questioned whether workers in rural India should be subjected to a system that can itself become a barrier to payment.

He described the attendance mechanism as one of the most problematic aspects of the new framework and argued that the technology-driven approach could discourage workers from seeking employment.

‘Quick conclusions shouldn’t be drawn’

Dey also stressed the significance of the employment guarantee for rural women. He argued that the programme had given many women an opportunity to enter the workforce, earn money and contribute directly to household survival.

Hussain maintained that more time and data are needed before drawing firm conclusions. Mehrotra stressed the continuing and potentially rising need for rural employment because of weak non-farm job creation and the large agricultural workforce.

Dey, meanwhile, argued that the decline is not new and that the July figures merely expose a problem that had been developing for months.

The common thread was that the effectiveness of an employment guarantee cannot ultimately be judged by the size of a budgetary announcement or the number of days promised on paper. The key question, as Dey put it, is how much employment is actually being provided.