Union Budget 2026 Raises Rural Employment Allocation, but Experts Say Funds Insufficient for 125-Day Guarantee

The Union Budget 2026 has proposed a substantial increase in spending on rural employment programmes, with a combined allocation of ₹1.25 lakh crore for two schemes operating during the transition to a new legal framework. While the government has described the move as a major boost for rural livelihoods, experts and activists have cautioned that the funds fall well short of what would be required to fulfil the promise of providing 125 days of employment to all eligible rural households.

Under the Budget, ₹95,692.31 crore has been allocated to the newly introduced Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin), or VB–G RAM G Act, 2025. In addition, ₹30,000 crore has been set aside for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which will continue to operate until the new law is formally notified and implemented by States.

Together, the allocation represents a 43% increase over the revised estimate of ₹88,000 crore for MGNREGS in 2025–26. However, analysts note that the headline increase does not translate into adequate funding when measured against the government’s stated employment targets.

Transition to a New Employment Law

The VB–G RAM G Act replaces the MGNREGA, 2005, and aims to expand the scope of guaranteed employment in rural areas. Under the new legislation, any rural household willing to undertake unskilled manual work can register and seek employment. Official data suggest that around 8.65 crore job card holders are currently active and eligible to demand work.

The new law, however, has not yet been formally notified. Once notified, State governments will have a six-month window to roll out their respective versions of the scheme. Until then, MGNREGS will continue as the operational programme, with the ₹30,000 crore allocation intended mainly to clear pending liabilities from the previous financial year and meet ongoing expenditure.

Funding Gap Highlighted by Experts

Activists working closely with rural employment programmes argue that the current budgetary provisions are insufficient to meet the government’s own commitments. According to their estimates, if all active job card holders are provided 125 days of employment at an average cost of ₹355 per person per day, the total expenditure would be close to ₹3.84 lakh crore.

Given the prescribed 60:40 cost-sharing arrangement between the Centre and the States, the Union government’s share alone would amount to approximately ₹2.30 lakh crore. This is nearly double the combined allocation announced in the Budget for both schemes.

Experts have also pointed out that outstanding dues continue to be a concern. Based on recent trends, pending payments are estimated at around ₹15,000 crore, with a similar amount likely to be spent in the coming months. Against this backdrop, the ₹30,000 crore earmarked for MGNREGS has been described as having limited relevance for the next financial year’s operational needs.

Government’s Position

The Union Rural Development Minister has defended the Budget, describing it as historic and highlighting a 21% increase in the overall rural development allocation, which has risen from ₹1.91 lakh crore in 2025–26 to ₹2.31 lakh crore in 2026–27.

According to the government, the Centre’s share for rural employment in the coming year has crossed ₹95,600 crore and will exceed ₹1.51 lakh crore once State contributions are included. The Minister has argued that this scale of funding will provide fresh momentum to rural India and strengthen livelihood security.

The Budget also includes measures beyond wage employment. In line with recommendations of the 16th Finance Commission, over ₹55,900 crore will be transferred directly to panchayats. The government has also announced an expansion of the Lakhpati Didi initiative, aimed at promoting women-led enterprises through community-owned retail outlets that improve market access for self-help group products.

Concerns Over State Burden

Despite these assurances, concerns remain about the financial and administrative burden on States. Several States have already presented their budgets without factoring in their share of funding under the new rural employment framework, as the Centre is yet to finalise and communicate normative allocations.

Policy observers note that while the Centre has fixed its own budgetary commitment, significant uncertainty persists around implementation on the ground. Delays in notification, clarity on cost-sharing, and the timing of fund releases could affect the scheme’s ability to deliver timely employment and wage payments.

Outlook

The increased allocation for rural employment in Union Budget 2026 signals the government’s intent to prioritise livelihood security during a period of economic transition. However, experts argue that without substantially higher funding and clearer operational guidelines, the goal of guaranteeing 125 days of work to all eligible rural households may remain difficult to achieve.

As the shift from MGNREGS to the VB–G RAM G Act unfolds, the effectiveness of the new framework will depend not only on headline budget figures but also on timely implementation, adequate financing, and coordination between the Centre and the States.