Rural workers are paying a heavy price for the Union Government’s ill-conceived tinkering with India’s employment guarantee law. Indeed, evidence is mounting of an unprecedented crash in employment generation under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and its successor, the Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin) alias VB-G RAM G Act.

One aspect of this crash has been widely noted: the 50% decline in employment generation under VB-G RAM G in July 2026, vis-à-vis MGNREGA in the same month last year. The 50% estimate is actually based on a premature figure of 7.7 crore person-days for July 2026. The latest figure is 8.3 crore, and the final figure is likely to be around 9 crore according to the Ministry of Rural Development. But even if we accept this anticipated total for July, the decline vis-à-vis July 2025 would be above 40%, which is a massive setback.

Misleading excuse

The Ministry of Rural Development made a lame attempt to attribute this setback to the fact that a few States explicitly suspended VB-G RAM G in parts of July 2026 under Section 6 of the Act, but this is the mother of all red herrings. For one thing, these States account for a small share of total MGNREGA employment, and the July 2026 decline looks much the same in proportionate terms when these States are left out. For another, the July decline is just the continuation of a crisis that began earlier.

Some background may help. A Bill paving the way for the replacement of MGNREGA with VB-G RAM G was rushed through Parliament in December 2025. The Rural Development Minister announced, at that time, that the replacement would take place on April 1, 2026. However, nothing of the sort happened on April 1. Evidently, the Ministry was not ready for the transition. The Rules, in particular, had not been framed. MGNREGA continued, by default.

On May 22, 2026, the Ministry released draft VB-G RAM G Rules for public consultation. These Rules are mainly a rehash of MGNREGA rules and orders. Release of the final Rules began at the end of June, just on time for the official replacement of MGNREGA with VB-G RAM G on July 1. VB-G RAM G wage rates were also notified on June 30, with a minimum norm of ₹300 per day — much the same as the earlier MGNREGA norm of ₹100 per day at 2009-10 prices.

The transition, the ground reality

During the first three months of this financial year (April to June), confusion prevailed. To paraphrase Gramsci, the old world of MGNREGA was dying, and the new world of VB-G RAM G was struggling to be born. In some districts, MGNREGA functionaries refused to open new works. In many areas, there was no MGNREGA work at all. This was a serious lapse, as MGNREGA is normally at a peak during these summer months (a slack agricultural season in large parts of India). The limbo continued in July 2026, when VB-G RAM G made a faltering start.

In 2024-25 and 2025-26, the first four months of the financial year (April to July) accounted for nearly 50% of annual employment generation — 128 crore and 119 crore person-days, respectively. In 2026-27, however, MGNREGA and VB-G RAM G generated only 70 crore person-days of employment in the same months — a decline of 43% from the average of the preceding two years.

Employment declined in all major States, but the decline was far from uniform across States (see chart). It was relatively small in a few States (example, Andhra Pradesh, Assam and Telangana), but larger than 40% in most States. In 10 out of 19 major States, the decline ranged between 60% and 85%. States where employment generation came to a virtual standstill in April-July 2026 include Madhya Pradesh, Uttar Pradesh and Jharkhand, some of India’s largest and poorest States.

This crash in employment is all the more startling as the transition to VB-G RAM G was supposed to lead to a huge increase in employment generation. The VB-G RAM G allocation in the 2026-27 Union Budget is ₹95,692 crore — a little more than the actual MGNREGA expenditure in 2025-26. The total VB-G RAM G budget, inclusive of State contributions (40% of the total for most States), was due to shoot up to ₹1.5 lakh crore or so — an increase of about 70% vis-à-vis MGNREGA expenditure in 2025-26. With wages more or less unchanged in real terms, one would expect this enhanced budget to trigger a big increase in employment generation. Instead, the first four months of 2026-27 witnessed an unprecedented crash.

An uncertain road ahead

It is, of course, too early to pass judgement on VB-G RAM G. But the launch is certainly a damp squib as things stand. The fact that employment generation has been virtually nil for months in some of India’s largest and poorest States is particularly alarming.

The situation may improve in the next few months, but it is hard to see how the projected VB-G RAM G expenditure of ₹1.5 lakh crore in 2026-27 is going to materialise. Wage payments may face serious problems too, with the imposition of facial recognition at the worksite and Centre-State cost-sharing. The outlook is bleak.

Jean Drèze is an independent scholar based in Ranchi, Jharkhand; Mohammad Zameer is an independent scholar based in Ranchi, Jharkhand