Economic Survey backs scrapping MGNREGS, cites structural flaws, strong rural economy

The Economic Survey tabled in Parliament on Thursday (January 29, 2026) defended the government’s decision to scrap the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), arguing that although the programme helped stabilise rural incomes since its launch in 2005, it has long grappled with “deep structural issues”.

The survey described the new rural employment legislation — the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025— as a “comprehensive legislative reset” designed to address shortcomings in the UPA-era scheme.

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Citing NABARD’s latest Rural Economic Conditions and Sentiments Survey (RECSS) from November 2025, the survey noted a “broad-based strengthening of rural economic fundamentals”. According to RECSS, rural India is experiencing robust consumption, high income growth, rising investments, improved access to formal credit, lower inflation perceptions, better loan repayment capacity, and high satisfaction with rural infrastructure. Another research report referenced by the survey shows rural consumption at a 17‑quarter high, driven by firm growth in both agricultural and non-agricultural real wages.

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Against this backdrop, the survey said that demand for MGNREGS has been steadily declining. Person‑days generated fell from the pandemic peak of 389.09 crore in FY21 to 183.77 crore in FY26 (up to December 31, 2025), a drop of more than 53%. This decline, it argued, coincides with rural unemployment falling from 3.3% in 2020‑21 to 2.5% in 2023‑24, suggesting that many households are finding non‑farm or other forms of work outside MGNREGS.

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However, activists and workers’ unions contend that demand was “artificially suppressed” due to low budget allocations and technological hurdles such as mandatory digital attendance, which they say created high barriers for workers.

The survey highlighted that improved rural economic conditions and reduced dependence on MGNREGS make it necessary to “re‑examine the design and objectives of employment guarantee programmes in light of changing rural realities.” It also acknowledged the scheme’s contributions to stabilising incomes and creating basic infrastructure, which it said had “transformed the nature of rural employment requirements.”

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Women’s participation rose sharply from 48% in FY14 to 58.1% in FY25. Yet the survey said these gains are overshadowed by “deeper structural issues”, including mismatch between expenditure and physical progress, work not being executed on the ground, use of machines in labour‑intensive tasks, and frequent bypassing of digital attendance systems. Misappropriation accumulated over time, and only a small proportion of households completed 100 days of work post‑pandemic, indicating that the scheme’s architecture has “reached its limits”.