MGNREGA shrinks while free food grows: What the policy pivot signals

The Narendra Modi government is diluting its stake in the MGNREGA scheme, costing Rs.86,000 crore annually, but continuing with the free food distribution PM Garib Kalyan Anna Yojana (PMGKAY) with an annual budgetary allocation of Rs 203,000 crore till 2029. While MGNREGA creates assets and rural jobs, the PMGKAY ensures bare survival and creates dependency.

Why is the government focusing on consumption-based subsidies for over 80 crore people rather than on rights-based employment guarantees?

The government has proposed to replace the MGNREGA with the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) or VB-G-RAM-G Bill 2025. The new scheme will increase the number of guaranteed days of employment per year from 100-days to 125 days; suspend the scheme during peak sowing and harvesting seasons (for an aggregate of 60 days) and distribute its costs between the Centre and the states in the ratio of 90:10 for the northeastern and Himalayan states and 60:40 for others, including UTS with legislatures. In essence, the Modi government will make the states responsible for employment, while it takes credit for food security.

Under MGNREGA, the Centre is bound to allocate more funds if there is demand for work — it is a statutory right. However, under the G-RAM-G, the Centre will make fixed state-wise allocations. The total budgetary allocation for MGNREGA has remained static at Rs 86,000 crore since 2024-2025, with huge unpaid liabilities — signalling the lack of enthusiasm of the government for the scheme, which it sees as a Congress-inspired one.

The advantages of MGNREGA are that it generates direct income for rural households, and creates long-term assets like ponds, roads, and irrigation structures that benefit the local community; empowers rural workers by giving them the legal right to demand work; and stimulates local economies with increased consumption because of wage circulation. Its downside is that to be implemented properly the scheme requires strong local governance. It is also vulnerable to corruption, wage delays, and uneven demand across states.  Most importantly, its benefits are less immediately visible.

Compare this with free food distribution that was started during the pandemic when millions of immigrant workers lost jobs and returned to their villages. The scheme was fully funded by the Centre, and was initially an emergency measure under the Food Security Act during the Covid-19 pandemic, where the states were not burdened to contribute. Initially, for three months, it was extended multiple times. As the government sought re-election in the 2024 general elections, it may have thought it unwise to do so and the scheme was extended.

In a grand gesture, it was extended till 2029. This would cost the government about Rs 11.8 lakh-crore over five years and would continue to cover over 80 crore beneficiaries, or two-thirds of India’s population. The Antyodaya Anna Yojana households get 35 kg of free food grain per month while priority households — low-income general families identified by state governments as requiring priority access to ration — get 5 kg per person per month. The grains are procured by the Food Corporation of India and distributed through the Public Distribution System.

In effect, New Delhi pays, and the states distribute with effectiveness being facilitated through increased coverage, transparency, ration card portability, and nutritional impact studies. The aim is to reduce hunger and malnutrition, stabilise poverty levels during crises, and improve the access of migrant workers to food by allowing portability of ration cards. Modi has framed free food grain distribution as a moral commitment, packaging his government’s image as compassionate and welfare driven.

The scheme, like all government plans, is not foolproof. There may be leakages and exclusions despite digitisation. There are reports of ineligible beneficiaries — those who are taxpayers and even own cars and directors of companies, and that 60 lakh to one crore beneficiaries do not lift their share of food grains over several months. While the effectiveness of the scheme may be tracked in terms of efficiency of distribution, it is very difficult to measure its nutritional outcomes.

There are some reports of diversion of the free food grain to the market. This could be because of direct diversion, where digitisation is not complete or because of diverse food habits across regions, where not all households may consume both the free rice and wheat allocations. Local traders may also offer to buy free food from households living on the edge who may need the cash for other household needs. Yet despite possible policy distortions and fiscal wastage if grain is diverted, the government seems to prefer an expanded PMGKAY over MGNREGA, which it seeks to dilute.

So why does the Modi government prefer a scheme that creates dependency rather than income and assets? The reasons are political. The optics created by free food grain distribution are far more attractive than any rural employment guarantee scheme. Free food grain reaches households directly every month while rural employment guarantee depends on the efficiency of local implementation, and there are frequent delays in wage payments generating local anger. Also, by forcing states to share the burden of the rural employment guarantee scheme, the Centre redirects public anger towards them.

So, free food grain makes for a great campaign narrative for voters, while MGNREGA cannot provide the same electoral leverage, as its outcomes are not necessarily visible in the short term. It is demand-based and the government is bound to provide employment if there is a need for it at the ground level. Besides, MGNREGA is still seen as a Congress legacy scheme and does not quite fit into the narrative of the ruling Bharatiya Janata Party.

If in the process of restructuring, the states struggle to finance the scheme that replaces MGNREGA and rural employment opportunities are reduced, so be it. If deserving, they can still consume free rice and wheat provided by the largesse of the Centre. Although the distribution of free food grain will not create income, assets or jobs, the poor will still vote for their ‘annadataas’ (food providers) because the scheme exists only at the discretion of those in power at the Centre.

The Opposition should be protesting not so much about Mahatma Gandhi’s name being buried in the process of restructuring, but about India’s barely developing welfare model being given a forcible turn — from rights-based to a charity-based one.

Bharat Bhushan is a New Delhi-based journalist.

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH)