Daily News Analysis ‘Economic Survey 2025–26: The Case for Scrapping MGNREGA’ : 30 January

The Economic Survey 2025–26 tabled in Parliament has staunchly defended the Union government’s decision to replace the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) with a new legislative framework, citing deep structural flaws and improved rural economic conditions.

The Survey argues that the scheme faces a significant mismatch between expenditure and actual physical progress, indicating inefficiencies in fund utilization.
There are widespread instances of machines being used in tasks meant to be labour-intensive, which defeats the core purpose of providing manual employment.
Despite technological interventions, the digital attendance systems are frequently bypassed, leading to accountability gaps and leakage of funds.
The Survey points out that misappropriation of funds has accumulated over time, and the scheme’s architecture has effectively reached its limits.
Data reveals that only a small proportion of households completed 100 days of work post-pandemic, suggesting the scheme is no longer fulfilling its full mandate.

Citing NABARD’s Rural Economic Conditions and Sentiments Survey (RECSS), the document notes a broad-based strengthening of the rural economy.
Rural India is currently experiencing robust consumption and high income growth, coupled with rising investments and better access to formal credit.
Research indicates that rural consumption is at a 17-quarter high, driven by firm growth in both agricultural and non-agricultural real wages.
There is improved loan repayment capacity and high satisfaction with rural infrastructure, signaling a shift away from distress-driven employment needs.

The Survey highlights a sharp decline in demand, with person-days generated falling from a peak of 389.09 crore in 2020–21 to 183.77 crore in 2025–26.
This drop of over 53% in work demand coincides with a fall in rural unemployment from 3.3% during the pandemic to 2.5% in 2023–24.
The data suggests that rural households are increasingly finding non-farm work or other forms of employment outside the MGNREGA safety net.
The reduced dependence on the scheme indicates that the distress migration it was designed to arrest has significantly reduced due to better local economic opportunities.

The government has introduced the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 as a comprehensive legislative reset.
This new Act is designed to address the specific shortcomings and inefficiencies of the UPA-era scheme while adapting to modern rural realities.
The Survey asserts that the changing nature of rural employment requirements necessitates a re-examination of the design and objectives of employment guarantees.
While acknowledging MGNREGA’s past role in stabilising incomes, the government argues that a new approach is needed to foster sustainable livelihoods rather than just temporary relief.

Activists contend that the decline in demand was artificially suppressed through low budget allocations rather than a genuine lack of need.
Workers’ unions argue that technological hurdles, such as mandatory digital attendance, created high barriers that discouraged workers from seeking employment.
Despite the criticism of the scheme, women’s participation actually rose to 58.1% in 2024–25, highlighting its continued importance for gender equity.
Critics fear that scrapping the act might remove the legal Right to Work, leaving vulnerable sections without a guaranteed safety net during future crises