MGNREGS 2025 Crisis: Why the 60% Spending Cap Matters for UPSC/SSC

The MGNREGS Spending Cap: A Game-Changer
In a major policy shift, the government has imposed a 60% spending limit on MGNREGS funds for April-September 2025 – the first half of FY 2025-26. Unlike earlier years when the scheme operated as a demand-driven safety net, this restriction comes amid record-high work requests. Rural households seeking work jumped 4.5% year-on-year, reaching 27.59 million in June 2025. Critics argue the cap will hit vulnerable communities hardest during lean farming seasons, especially since 20% of the budget typically clears previous years’ pending wages.

Two Decades of MGNREGS: Promises vs Reality
2025 marks 20 years since MGNREGS launched, guaranteeing 100 days of annual work per rural household. Born after post-1991 liberalization agricultural wage declines, it became a lifeline during COVID-19, absorbing 7.9 crore workers in 2020-21. Yet chronic issues persist:
Budget shortfalls and wage delays
Only 7.4% of households achieved 100-day work in 2018-19
Average work days fell to 52 in 2023-24

The Rural Distress Indicators
Soaring MGNREGS demand reveals deeper economic pain:
Rural wages shrinking against inflation
Farm job dependency rising to 46% (from 42.5% in 2019)
Sluggish rural consumption per CMIE data
This reflects agriculture’s paradox: it employs 46% of Indians but contributes just 16% to GDP.

Why Farming Can’t Be the Savior
Despite projected 4.6% agriculture growth in FY25, real wages remain frozen. The sector relies heavily on monsoon-dependent Rabi harvests. Distressingly, agriculture has become a “fallback option” – evident when migrant workers flooded farms during lockdowns. NABARD data shows farm households earn just 33% of income from cultivation, forcing dangerous debt cycles to cover rising input costs.

Green Revolution’s Mixed Legacy
Post-1970s food security gains came at a cost:
Regional inequalities widened
Rainfed areas and millets neglected
Ecological damage from intensive farming
While Punjab and Haryana saw rural job growth via agro-industries, many states witnessed “distress-driven” non-farm employment as farmers sought side incomes.

The Way Forward
The MGNREGS cap contradicts its legal mandate as demand-driven work guarantee. Solutions require:
Scaling irrigation and climate-resilient farming investments
Reforming MGNREGA fund allocation
Boosting agro-processing to create sustainable jobs
As both farming and MGNREGS operate as distress buffers, policy must prioritize employment quality over fiscal limits.


Why This Matters for Exams:
MGNREGS and rural employment are high-yield topics for UPSC, SSC, KAS, and state PSCs. Recent changes feature in:
UPSC Mains: GS Paper III (Economy, Inclusive Growth)
SSC CGL: General Awareness + Descriptive Papers
KAS: Karnataka-specific rural schemes analysis
Questions often combine policy changes, agrarian data, and social justice angles – exactly like the spending cap issue.

Questions & Answers on MGNREGS:
Q1: How does the 2025-26 MGNREGS spending cap impact rural households?
*A1: The 60% fund restriction for April-September 2025 risks delaying wage payments during peak lean seasons. With 20% of budgets typically clearing past dues, households face reduced work days amid 4.5% higher demand.*
Q2: Explain agriculture’s ’employment paradox’ in India.
*A2: Agriculture employs 46% of workers (2023-24) but contributes only 16% to GDP. Despite 4.9% GVA growth (last 8 years), real wages stagnate – revealing weak job quality and low productivity.*
Q3: Why is MGNREGS called a ‘distress buffer’?
*A3: The scheme absorbs workers during crises, like COVID-19 when 7.9 crore sought jobs. Rising demand (27.59M households in June 2025) signals scarce alternatives, making it a critical safety net.*
Q4: What structural flaws in rural employment were exposed by the Green Revolution?
*A4: While boosting food output, it created regional disparities, neglected rainfed areas/millets, and pushed marginal farmers into debt-driven non-farm work – often low-wage informal jobs.*
Q5: Suggest reforms to strengthen MGNREGS post-spending cap.
*A5: Solutions include:
Dynamic fund allocation based on real-time demand
Integration with skill development programs
Faster wage payments via DBT
Climate-resilient asset creation to boost rural infrastructure*