Winning Bizness Desk
Mumbai.The new rural employment law, developed India guarantee for employment and livelihood mission, is expected to strengthen state finances and rural incomes across the country. President Droupadi Murmu approved the Bill on December 21, turning it into law. According to a latest report by State Bank of India, states together are likely to gain a net benefit of nearly ₹17,000 crore despite changes in the funding pattern. The scheme aims to expand job security in villages while balancing financial responsibility between the Centre and the states.
New law expands rural work guarantee
Under the new law, every rural household will now be guaranteed 125 days of work in a year, compared to 100 days earlier. The government says this expansion will provide more stable income to village families and improve economic security during uncertain times. The scheme is designed to create sustained employment while also supporting rural development activities.
Key changes under the law include:
- Annual work guarantee raised from 100 to 125 days
- Focus on employment and livelihood together
- Wider coverage of rural households
These steps are expected to increase participation and demand for work in rural areas.
Funding pattern shared by centre and states
The funding structure of the scheme has been a major point of debate. As per Section 22 of the law, the cost will be shared by the Centre and states. For general category states, the Centre will bear 60 percent of the expenditure, while states will contribute 40 percent.
For northeastern states, Himalayan states and Union Territories such as Uttarakhand, Himachal Pradesh and Jammu and Kashmir, the Centre will cover 90 percent of the cost. The remaining share will be borne by the respective state or Union Territory administration.
SBI’s report says that this structure does not weaken state finances, as feared by some critics.
States can regulate work during farm seasons
The law also gives flexibility to state governments. Under Section 6, states can regulate work availability for up to 60 days in a year during peak agricultural seasons such as sowing and harvesting. This provision ensures that farm activities are not disrupted due to labour shortages.
This balance is meant to support:
- Agricultural productivity
- Rural wages stability
- Efficient use of public funds
The approach mirrors lessons learned from the implementation of the existing rural employment schemes.
UP, Maharashtra Bihar to gain the most
SBI compared allocations under the new system with MGNREGA data from the last seven financial years, from FY19 to FY25. The analysis shows that Uttar Pradesh and Maharashtra are expected to gain the most from the new framework. Bihar, Chhattisgarh and Gujarat are also among the major beneficiaries.
Some states, such as Tamil Nadu, may see a marginal decline. However, SBI notes that if one-time special allocations from previous years are excluded, the funding trend for these states remains largely stable.
No extra debt burden on states
The report dismisses concerns that the 60:40 funding ratio will force states to borrow more. SBI says such fears arise from a misunderstanding of state finances. Under the new system, funds will be distributed based on equity and efficiency, ensuring both developed and less-developed states receive fair support.
SBI also highlights that states have an opportunity to improve outcomes by using their 40 percent share effectively. Better planning can lead to higher employment generation and faster development of rural infrastructure, making the scheme financially and socially sustainable in the long run.
