MGNREGA Demand Decline: A Positive Sign

Context

Demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has shown a sharp and sustained drop, indicating improving economic conditions in rural India. Official data reveals that the number of households seeking work under the scheme fell by 35.3% in October 2025 compared to the same month the previous year. Over the longer term, the number of rural workers relying on MGNREGA dropped from a pandemic peak of 111.9 million in 2020-21 to around 78.8 million in 2024-25, returning to pre-Covid levels.​

Demand declines because of the following reasons

• Greater Rural Wages and Non-Farm Opportunities: The drop in MGNREGA demand has been explained by various factors, such as a stronger real agricultural and non-agricultural wages, an increase in the sale of tractor and fertilizers, and a healthy growth of farm credit. Increased non-farm employment and urban migration has also helped to reduce the demand of MGNREGA working days.​
• Budgetary Constraints and Policy Measures: the government placed a capping of 60 percent on labor-budget expenditure on MGNREGA in first half of the financial year, which must have limited work generation. There is also tightening of the procedures, paying wages late and e-KYC restrictions further decreased the involvement of workers, particularly among women and the elderly.​
• State-Level Differences: On the one hand, there are some state-level differences even though national demand has been reduced. The increased demand of MGNREGA has been experienced in states such as Maharashtra, Bihar, Himachal Pradesh, Arunachal Pradesh, and Tripura, even greater surpassing their peaks of 2020-21 pandemic. As an example, the highest demand was noted in Bihar, 51.36 lakh families accessed MGNREGA benefits in 2024-25, and in Maharashtra, the number increased steadily over 16.84 lakh in 2020-21 to 24.46 lakh in 2023-24. By comparison, other states like Uttar Pradesh, Madhya Pradesh, Rajasthan, Odisha, Assam, Jharkhand, Chhattisgarh and Telangana have seen a reduced demand.​

Rural Economy Implication

• Resilience and Diversification: Decreasing of the MGNREGA demand is an indicator of a robust rural economy that has more employment opportunities beyond the program. The growth forecast of 6.3-6.8 has been maintained by the finance ministry over the entire year and this is based on the optimism about the strength of the rural sector. Enhanced rural roads, connectivity and irrigation as well as specialization programs through skilling are also regarded as major drivers in deepening non-farm employment.​
• Income and Employment Trends: The average income earned by individual MGNREGA households declined by 4.8% that is, between the FY 2024-25 and FY 2025-26. This is important because the amount of people that MGNREGA is able to employ is gradually reducing every year, with only eight states registering an increase whilst the rest experienced a reduction in the number of person-days that the program can generate within FY 2025-26 over FY 2024-25.​

Policy Recommendations

• Maintaining Positive Momentum: In order to continue to maintain the positive momentum in the rural labor markets, the policy makers should work on enhancing the rural infrastructure, accessibility and irrigation. Subsidized skilling can be used to intensify non-farm employment and decrease reliance on MGNREGA. Another aspect that is important to sustain worker participation is to address digital barriers and remunerate employees on time.​
• Monitoring and Data Transparency:MFGNA demand and employment trend must be monitored continuously to help in the formulation of the policy. Regular release of disaggregated data, by state and demographic group will serve to facilitate public control and also to pinpoint areas that require intervention.

Source: BS

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