New rural employment Act misses opportunity to guarantee minimum wages and address MGNREGA issues
The article, an analysis by Jean Drèze, argues that the new Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G) Act, 2025, fails to correct serious anomalies in MGNREGA wage rate determination. It highlights how MGNREGA wages have lagged behind minimum and market wages due to a real-wage freeze imposed by the central government since 2009. This has led to a "discouragement effect" and increased corruption. The new Act perpetuates this crisis by retaining central government power to set wages (Section 10) and dropping the provision for State-specific minimum wages (Section 6(2)), despite wage costs now being shared 60:40 with States.
Key Points
- The VB-G RAM G Act, 2025, is criticized for not addressing the long-standing issue of MGNREGA wage rates lagging behind minimum and market wages.
- A central government real-wage freeze since 2009, based on the Consumer Price Index for Agricultural Labourers, has led to MGNREGA wages being lower than State minimum wages.
- The new Act retains the central government's power to determine wage rates (Section 10) and removes the provision for State-specific minimum wages (Section 6(2)), despite shared wage costs.
- Delays in wage payments and technical failures have created a "discouragement effect" among workers, contributing to corruption and reduced interest in MGNREGA.
Exam Facts
- The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) determines wage rates under Section 6.
- The new law is the Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) Act (VB-G RAM G Act).
- Wage costs under the VB-G RAM G Act are shared 60:40 between the Centre and States.
- Jean Drèze, Visiting Professor at the Department of Economics, Ranchi University, is the author.
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