MGNREGA Replaced by VB-GRAM G Act; Govt. Addresses "Fake Demand" Concerns

MGNREGA replaced by new act; government assures no "fake demand" during transition, amidst dues to West Bengal.

Photo by Markus Spiske

In a significant policy shift, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has been replaced by the Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-GRAM G) Act, 2025. The Rural Development Ministry informed a Parliamentary Standing Committee that it is coordinating with states to prevent "fake demand" under the scheme during the transition period.

This comes amidst criticism from some BJP members about MGNREGA's redundancy due to other welfare schemes and allegations of corruption. The Ministry also acknowledged pending dues to West Bengal, which were stopped in March 2022 due to non-compliance with central directives, highlighting issues of federal fiscal relations and scheme implementation.

Key Facts

MGNREGA replaced by Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-GRAM G) Act, 2025

MGNREGA repealed on December 18

Funds to West Bengal stopped in March 2022

Union government owes ₹3,082.52 crore to States, including ₹1,457.22 crore in wages to West Bengal

UPSC Exam Angles

Evolution and comparison of rural employment guarantee schemes (MGNREGA vs. VB-GRAM G)

Federal fiscal relations and centre-state cooperation/conflict in scheme implementation

Governance challenges: corruption, 'fake demand', accountability in welfare schemes

Role of Parliamentary Standing Committees in policy oversight

Constitutional provisions related to social welfare and right to work (DPSP, Article 41)

Visual Insights

MGNREGA vs. VB-GRAM G Act (2025): A Policy Shift

This table highlights the key differences and continuity between the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and its successor, the Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-GRAM G) Act, 2025. It's crucial for understanding the government's evolving approach to rural employment and welfare.

Feature	MGNREGA (2005)	VB-GRAM G Act (2025)
Primary Objective	Guarantees 100 days of unskilled manual wage employment to rural households.	Guarantees employment & livelihood, aligning with 'Viksit Bharat' vision; emphasis on productive asset creation.
Legal Framework	Mahatma Gandhi National Rural Employment Guarantee Act, 2005	Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025
Focus	Poverty alleviation, rural development, social safety net, demand-driven employment.	Sustainable livelihoods, skill enhancement, productive asset creation, economic upliftment, 'Developed India' goals.
Addressing 'Fake Demand' / Corruption	Criticized for allegations of corruption, 'fake demand', and non-durable assets.	Explicitly aims to prevent 'fake demand' through enhanced monitoring and compliance mechanisms.
Implementation Model	Decentralized, Gram Panchayats play a key role, shared funding (Centre & States).	Continued coordination with states, likely stricter central directives and monitoring for accountability.
Work Categories	Focus on water conservation, irrigation, rural connectivity, land development.	May introduce new types of permissible works, possibly linked to modern infrastructure, technology, environmental sustainability.

Federal Fiscal Relations: West Bengal and Pending Dues (as of Dec 2025)

This map highlights West Bengal, a state central to the news regarding pending dues under MGNREGA (prior to VB-GRAM G) due to non-compliance. It contextualizes the issue within India's federal fiscal relations, where central directives and state compliance are critical for scheme implementation and fund disbursement.

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📍West Bengal📍Delhi

More Information

Background

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), enacted in 2005, is a flagship social security and labour law that aims to guarantee the 'right to work' by providing at least 100 days of wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work. It is a demand-driven scheme. Over the years, it has been lauded for its role in poverty alleviation, women's empowerment, and creating rural infrastructure, but has also faced criticism regarding corruption, delayed wage payments, asset quality, and 'fake demand'.

Latest Developments

The government has announced the replacement of MGNREGA with the Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-GRAM G) Act, 2025. This policy shift comes amidst concerns about 'fake demand' and allegations of corruption in MGNREGA.

The Rural Development Ministry is coordinating with states to manage the transition. The issue of pending dues to West Bengal, halted due to non-compliance with central directives, highlights ongoing challenges in federal fiscal relations and scheme implementation.

Practice Questions (MCQs)

1. Consider the following statements regarding the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and its proposed replacement: 1. MGNREGA is a demand-driven scheme guaranteeing 100 days of wage employment to every rural household. 2. The Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-GRAM G) Act, 2025, is intended to replace MGNREGA. 3. Under MGNREGA, the central government bears the entire cost of material and administrative expenses, while states pay the wage component. Which of the statements given above is/are correct?

A.1 only
B.1 and 2 only
C.2 and 3 only
D.1, 2 and 3

Show Answer

Answer: B

Statement 1 is correct. MGNREGA is a demand-driven scheme guaranteeing 100 days of wage employment to every rural household whose adult members volunteer for unskilled manual work. Statement 2 is correct as per the news, VB-GRAM G Act, 2025, is set to replace MGNREGA. Statement 3 is incorrect. Under MGNREGA, the central government bears 100% of the unskilled labour wage cost and 75% of the material cost, 6% of administrative costs. The state governments bear 25% of the material cost and 50% of the unemployment allowance.

2. In the context of federal fiscal relations in India, the recent issue of pending dues to West Bengal under a central scheme due to 'non-compliance with central directives' primarily highlights which of the following? 1. The discretionary powers of the Union government under Article 282 of the Constitution. 2. Challenges in implementing conditional grants from the Centre to States. 3. The limitations of states in raising their own revenue for welfare schemes. 4. The role of the Comptroller and Auditor General (CAG) in auditing state expenditures. Select the correct answer using the code given below:

A.1 and 2 only
B.2 and 3 only
C.1, 2 and 4 only
D.1, 2, 3 and 4

Show Answer

Answer: A

The issue of pending dues due to 'non-compliance with central directives' directly relates to conditional grants (Statement 2), where funds are released by the Centre to states for specific purposes with certain conditions attached. The Centre's ability to withhold funds in such cases can be linked to its discretionary powers, often exercised under Article 282 for grants for any public purpose (Statement 1). Statement 3, while a general challenge for states, is not the primary highlight of 'non-compliance with central directives' in this specific context. Statement 4, the CAG's role, is about auditing, not directly about the mechanism of withholding funds for non-compliance, although CAG reports might highlight such issues.

3. Which of the following is NOT a common criticism leveled against the implementation of large-scale rural employment guarantee schemes like MGNREGA in India?

A.Creation of 'fake demand' and ghost beneficiaries leading to leakages.
B.Delay in wage payments to workers, impacting their livelihoods.
C.Significant out-migration of rural labour to urban areas due to increased local employment opportunities.
D.Poor quality of assets created and lack of durable infrastructure development.

Show Answer

Answer: C

Statements A, B, and D are common and well-documented criticisms of MGNREGA. 'Fake demand' and corruption (A), delayed wage payments (B), and poor asset quality (D) have been persistent issues. Statement C is incorrect because a primary objective and often observed effect of MGNREGA is to reduce distress migration by providing local employment. Significant out-migration due to *increased* local employment opportunities is contradictory; if local employment increases, out-migration should ideally decrease or stabilize, not increase due to the scheme's success.

4. Assertion (A): The government's concern about 'fake demand' under the new VB-GRAM G Act is a key driver for replacing MGNREGA. Reason (R): MGNREGA, being a demand-driven scheme, inherently creates incentives for local authorities to inflate demand figures to secure more funds. Which of the following is correct in the context of the above statements?

A.Both A and R are true and R is the correct explanation of A.
B.Both A and R are true but R is not the correct explanation of A.
C.A is true but R is false.
D.A is false but R is true.

Show Answer

Answer: A

Assertion (A) is true, as the news explicitly states the government's concern about 'fake demand' as a reason for the policy shift. Reason (R) is also true and provides a valid explanation for A. The demand-driven nature of MGNREGA, where funds are allocated based on the demand for work generated, can indeed create perverse incentives for local implementing agencies to inflate demand figures to attract more central funds, leading to 'fake demand' or ghost beneficiaries. Thus, R correctly explains A.