Even as El Niño threatens India’s rural economy, with cumulative rainfall running 43% below normal as of June 28, a key income support programme for rural workers is being phased out. The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) will be replaced from July 1 by the Viksit Bharat — Guarantee for Rozgar and Ajeevika Mission (Grameen), or VB-G RAM G.

The transition is already affecting rural employment. Person-days generated under MGNREGS in the first quarter of FY27, as of June 25, fell 49.5% from the same period a year earlier.

The decline comes during the peak demand period for rural jobs, after the rabi harvest and before kharif sowing gathers pace. The reduction in work generation has sharply cut incomes for workers who have relied on the programme for nearly two decades since it was introduced in 2005.

Although the VB-G RAM G is scheduled to begin on July 1, it faces several uncertainties. It requires states to notify a mandatory 60-day no-work period, of which 15-20 days are expected to coincide with ongoing kharif sowing. The no work period has been mandated to ensure agricultural labour is available during peak sowing and harvesting seasons.

The mandatory approval of new schemes by gram panchayats remains incomplete in many places. Unlike MGNREGS, which guaranteed work on demand as a legal entitlement, VB-G RAM G functions as a centrally sponsored scheme where job availability depends on allocations from the Centre.

Birth Pangs Of VB-G RAM G

Some states appear better prepared than others. Rajasthan, which has been among the stronger performers in implementing MGNREGS and conducting social audits, said it is ready.

Pushpa Satyani, Commissioner of Rajasthan’s Employment Guarantee Scheme, told The Core that schemes are ready for rollout, most gram panchayat approvals have been secured, and the remainder will be completed by June 29. Training of officials has been completed, eKYC of job cards is over, and the digital platform for the direct benefit transfer is ready.

“The transition will be smooth”, she assures.

She said some issues remain unresolved, including notification of the no-work period as Rajasthan waits for the monsoon. The state is also awaiting clarity from the Centre on whether plantation work requiring community participation will be permitted.

Rajasthan has earmarked Rs 4,000 crore as its 40% contribution under VB-G RAM G. The Centre allocated Rs 7,581.87 crore to the state on June 9.

Grassroots activists, however, are not so optimistic about the situation on the ground.

Mukesh Goswami, an MGNREGS activist from Rajasthan’s Rajsamand district, said there was little clarity among officials at panchayat, block and district levels.

“When we speak with them, they say there is no direction from the state government yet and that they have been instructed not to accept work applications or issue muster rolls from June 15 onwards”, he told The Core.

He said schemes planned under the new programme are yet to be presented or approved by gram panchayats in several districts.

In Jharkhand, concerns are similar.

James Herenj, an activist in Palamu, said the state faces multiple challenges. Officials handling implementation at panchayat, block and district levels are on contract and have been on strike since February, demanding regularisation.

As a result, uncertainty remains over the status of works to be rolled out.

Questions also remain over the state's funding commitment after the Centre's allocation came only on June 9.

“I expect the ongoing or approved MGNREGS works would roll on, not any new scheme under the VB-G RAM G, and the roll out will be half-hearted because of inadequate preparations”, he said.

Chakradhar Buddha, a Vishakhapatnam-based rural development researcher and co-founder of LibTech India, who tracks employment programmes in Andhra Pradesh, Telangana and Karnataka, sees Andhra Pradesh as the most prepared, Karnataka as the least prepared and Telangana in between.

He said enthusiasm in Andhra Pradesh may partly stem from concerns among contract workers who fear job losses as the programme shifts away from a rights-based approach.

MGNREGS has historically played an important role in Andhra Pradesh, and the state now faces pressure to demonstrate that the replacement programme can generate similar employment without reducing benefits for workers.

Buddha also raised questions over allocation criteria.

“What is the basis for the Centre’s allocation of funds to individual states? There is no explanation or transparency in this exercise. Even the allocated funds may not be released to states, as releases are likely to be conditioned on states’ own allocations and work competition reports”, he said.

He pointed to additional concerns across Andhra Pradesh, Telangana and Karnataka, including incomplete training, pending classification of panchayats under Centre-defined categories and differing political approaches among states.

Opposition has also emerged from worker groups and activists.

The NREGA Sangharsh Morcha (NSM), which has played a major role in MGNREGS implementation, opposes the new scheme over concerns about dilution of workers’ rights to demand and get jobs, greater central control and mandatory use of biometric and Aadhaar-linked systems.

NSM's Nikhil Dey said the group wants MGNREGS restored “which is meant to address rural distress as it did when Covid-19 struck”.

The All India Agricultural Workers’ Union plans protests from July 1 across villages demanding the repeal of VB-G RAM G.

Buddha argues that the timing of the transition may worsen pressure on rural communities already facing weather risks.

“Given that the El Niño threat was foreseen for months, the Centre should have had the good sense of deferring VB-G RAM G and continuing with the MGNREGS to avoid the inevitable transitional pangs and help farmers and other rural workers in their time of distress”, he said, even as he insists that the MGNREGS should continue.

He also noted that 31% of registered MGNREGS workers, as of June 24, had yet to complete eKYC and risk being excluded from the transition under current rules.

How The MGNREGS Contributed To Rural Incomes

The MGNREGS has successfully operated in India for 20 years and has been among the larger employment programmes in rural India.

The scale of the slowdown this quarter has been significant.

In the first quarter of FY27, as on June 25, work generation fell by 502.6 million person-days compared with the same period a year earlier. The quarter typically accounts for the highest demand for MGNREGS work. In FY26, it represented 44% of annual work generated; the average during FY22-FY26 was 38.2%.

The largest declines have been recorded in poorer states, including Bihar, Jharkhand, Odisha, Uttar Pradesh, Madhya Pradesh and Rajasthan.

Uttar Pradesh recorded a shortfall of 95.6 million person-days, followed by Bihar at 85.7 million and Madhya Pradesh at 71.1 million.

Women and socially vulnerable communities account for a large share of employment generated under the programme. In FY27, as of June 25, women accounted for 61.9% of person-days generated, while Scheduled Castes and Scheduled Tribes accounted for 16.8% and 18.2%, respectively.

Research has also linked MGNREGS participation with improved household incomes and lower poverty levels.

A 2020 study by the University of California and the University of Virginia covering 157 sub-districts concluded that “earnings increased by 12.7%, leading to a 17.4% reduction in an income-based measure of poverty”.

A 2015 study by NCAER and the University of Maryland found that “at least 25% of the decline in poverty since 2004-5 for participating households can be attributed to participation in MGNREGA.”

The study also found that participating households were less dependent on moneylenders and more likely to have children with higher levels of education.

Other studies have found that MGNREGS reduced debt burdens, supported rural wages and provided a major source of employment during the Covid-19 period, when it generated work for 45% of rural households.

That support may now become less certain during the transition.

The annual wage revision has been delayed due to the shift to VB-G RAM G, and for reasons not yet clear, average wages have declined from Rs 267.08 in FY26 to Rs 265.7 in FY27.

As India enters a season already hampered by weak rainfall, the transition from MGNREGS to VB-G RAM G leaves little room for disruption.

Whether the new programme can match the reach and reliability of the scheme it replaces will become clear only in the months to come. Meanwhile, for millions of rural households facing uncertain farm incomes, even a temporary gap in work and wages could increase distress well beyond this monsoon season.