MGNREGA to be replaced from July 1: What VB–G RAM G Bill proposes

The Centre on Monday, May 11, notified the Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, paving the way for the replacement of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005 from July 1, 2026.

The new law, officially called the VB–G RAM G Act, promises 125 days of guaranteed wage employment for rural households, replacing the existing 100-day guarantee under MGNREGA. The Ministry of Rural Development said the transition would be “smooth and worker-centric”, with existing job cards remaining valid until new rural employment guarantee cards are issued.

According to a notification issued by the Press Information Bureau (PIB), all ongoing MGNREGA works till June 30 will continue without disruption and will be integrated into the new framework.

What is the VB–G RAM G Bill

The Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin) Bill, 2025 seeks to overhaul India’s two-decade-old rural employment framework by introducing a technology-driven, infrastructure-focused and productivity-linked system.

The government has projected the legislation as a modernised replacement for MGNREGA that aligns with the ‘Viksit Bharat@2047’ vision. However, critics have raised concerns over the increased financial burden on states and the shift away from a fully demand-driven employment guarantee model.

The Centre has allocated Rs 95,692.31 crore for the programme in FY 2026-27, the highest budget estimate for a rural employment scheme so far. Including state contributions, the total outlay is expected to cross Rs 1.51 lakh crore.

Key changes proposed under VB–G RAM G

The new Act guarantees 125 days of wage employment per rural household every financial year, compared to 100 days under MGNREGA.

The government said the increase aims to strengthen livelihood security and improve rural incomes. Workers will continue to receive unemployment allowance if jobs are not provided within the prescribed timeline.

Centre-state funding pattern changed

One of the biggest changes under the new law is the revised cost-sharing formula.

Under MGNREGA, the Centre bore 100 per cent of unskilled wage costs. Under VB–G RAM G, states will now share wage expenditure. The proposed ratio is:

• 90:10 for Northeastern and Himalayan states, and Union Territories with legislature such as Jammu and Kashmir
• 60:40 for all other states and UTs with legislature
• 100 per cent Central funding for UTs without legislature

This effectively increases the fiscal responsibility of state governments.

Demand-driven system replaced by ‘normative allocation’

The Bill replaces MGNREGA’s labour budget mechanism with a “normative allocation” model.

Under the earlier system, states submitted annual labour budgets based on local demand for work. The Centre then released funds accordingly.

Under VB–G RAM G, the Centre will determine state-wise allocations using “objective parameters”. Any expenditure beyond this allocation will have to be borne by the respective state governments.

The legislation also allows states to suspend rural public works during peak agricultural seasons. States can notify up to 60 days every financial year covering sowing and harvesting periods, during which no scheme-related work can be undertaken.

The Centre argues this will improve labour availability for agriculture and reduce wage inflation during critical farming cycles. However, some analysts believe this may reduce the effective period available for workers to complete the promised 125 days.

Focus on infrastructure, water security and climate resilience

Under the new framework, all projects must originate from Viksit Gram Panchayat Plans.

These plans will be consolidated from gram panchayat to district and state levels before being integrated into the Viksit Bharat National Rural Infrastructure Stack.

The programme will prioritise four broad sectors:

• Water security projects
• Rural infrastructure
• Livelihood-linked infrastructure
• Extreme weather mitigation works

The plans will also be linked with the PM Gati Shakti National Master Plan to improve coordination across departments.

Why is the Centre replacing MGNREGA

The government has argued that MGNREGA no longer reflects present rural realities and suffers from structural inefficiencies.

According to official data cited in the policy framework, alleged fund misappropriation under MGNREGA stood at Rs 193.67 crore in FY 2024-25, while only 7.61 per cent of households completed the full 100 days of employment.

The Centre said the new framework will improve transparency and efficiency through digital monitoring and AI-enabled fraud detection.

What the new law means for workers and farmers

For rural workers, the government has highlighted:

• Increased employment guarantee from 100 to 125 days
• Direct benefit transfer-based wage payments
• Aadhaar-linked verification to reduce delays and fraud
• Weekly public disclosure of scheme data
• Twice-yearly social audits

For farmers, the government expects:

• Better labour availability during sowing and harvesting seasons
• Lower wage pressure during peak agricultural activity
• Improved irrigation and water infrastructure
• Better rural roads, storage and market connectivity

Existing job cards to remain valid

The government clarified that current e-KYC verified MGNREGA job cards will remain valid until new rural employment guarantee cards are issued.

Workers without job cards can apply through gram panchayats. The ministry also said no worker would be denied employment solely because e-KYC formalities remain pending.

Draft rules for implementation, grievance redressal, administrative expenditure, unemployment allowance payments and transition arrangements are being prepared in consultation with states and Union Territories.

The VB–G RAM G Act will officially come into force across rural India on July 1, 2026, marking one of the biggest changes to India’s rural employment architecture since MGNREGA was introduced in 2005.