Why NREGA wage rates should be revised

With over 25 crore registered workers, NREGA is the largest employment guarantee programme in the world. It provides up to 100 days of work annually to rural households.

The Ministry of Rural Development (MoRD), which implements NREGA, notified the state-wise daily wage rates for Financial Year (FY) 25-26 in the last week of March. These vary from Rs 241  in Nagaland to Rs 400 in Haryana, with the national average wage standing at Rs 294, a modest 5% increase from FY 24-25.

NREGA wage rates have long been a point of contention, with the Parliamentary Committee, worker unions, and civil society actors advocating for a higher wage rate for over a decade. The main concerns with the NREGA wage are its increasing distance from the notified minimum wage rate, the discrepancies in state-wise wages, and its poor inflation indexation.

How NREGA wage rates are decided

Section 6 of the Act provides two methods for calculating NREGA wage rates.

• Section 6(1) empowers the Centre to notify the wage rate notwithstanding the Minimum Wages Act, 1948 (MWA). The notified wage, however, cannot be lower than Rs 60.
• Section 6(2) states that until the Centre notifies a wage rate, the state’s minimum agricultural wage rate shall be taken as the NREGA wage rate.

From 2005 to 2009, NREGA wages were equal to the minimum agricultural wage rate of each state. However, the concurrent upward revisions of states’ minimum wages led to an increasing financial burden on the Centre, which foots the entire NREGA wage bill.

This prompted the Centre to cap the NREGA wage rate at Rs 100 in 2009. Now, workers in some states were being paid less than the statutory minimum wage, in violation of the MWA. Moreover, capping the wage rate meant that the wages in real terms would actually decline over time.

The Rs 100 cap was subsequently challenged in court. The Karnataka High Court in 2011 upheld the supremacy of the MWA, and directed the Centre to pay no less than the prevailing minimum wage in each state. The Supreme Court upheld this order in 2012.

In 2010, the Central Employment Guarantee Council, a statutory advisory body on MGNREGA, set up a Working Group on Wages under eminent economist Jean Dreze. The Dreze Committee recommended a return to Section 6 (2) for setting NREGA wages. As an emergency measure, it also suggested indexing the wage rate to the Consumer Price Index for Agricultural Workers (CPI-AL) to ensure that the “frozen” Rs 100 wage would at least be revised upwards with inflation.

The National Advisory Council, headed by Sonia Gandhi, also recommended paying the minimum wage.

Nonetheless, in December 2010, the Centre decided to go ahead with delinking the NREGA wage rate from the minimum wage. However, it did index the wage rate to the CPI-AL from FY 2011-12. This is how NREGA wage rates are calculated even today. The MoRD notifies annual rates for each state indexed against the CPI-AL with 2009 as the base year.

As a result, NREGA wage rates are lower than the minimum agricultural wage rate in nearly every state. In some states, the gap between the two is more than Rs 200. (See Chart).

Note: Data for select states compiled by the author from individual state labour websites. If a range of minimum wages was given, the lowest has been taken. As of April 1.

Committees constituted, recommendations ignored

Over the years, the Centre has set up multiple committees to examine the NREGA wage rate (or wage rates in general). But it has thus far ignored their recommendations.

THE MAHENDRA DEV COMMITTEE (2014) had two main recommendations. First, that the NREGA wage be no less than the state’s minimum wage, and second, that the wage be indexed to CPI-Rural (CPI-R), instead of CPI-AL, with the base year being updated from 2009 to 2014.

The Ministry of Finance rejected the recommendations saying that the fiscal burden of doing so would be too high.

THE NAGESH SINGH COMMITTEE (2017) said that linking NREGA wages to state minimum wages was not necessary, but recommended shifting from CPI-AL to CPI-R. Notably, unlike the Mahendra Dev Committee, this committee consisted solely of government representatives, and did not include independent economists and union representatives.

The MoRD in 2019 stated that it had accepted the Nagesh Singh Committee recommendations, but in 2021 announced that it will continue with the CPI-AL. No explanation has been given for this yet.

THE ANOOP SATPATHY COMMITTEE (2019) recommended a National Floor Wage of Rs 375 per day (based on July 2018 prices). This would serve as a minimum benchmark for wages across states and sectors, including in NREGA.

In FY 25-26, only 2 states, Goa and Haryana, have a NREGA wage above the recommended floor wage of Rs 375. Adjusting for inflation, this rate would be even higher today.

Key issues with NREGA wage rates

The most pressing issue with the NREGA wage today is its increasing divergence from the minimum wages for each state. In FY 25-26, the difference between the MGNREGA wage and the state minimum agricultural wage is as high as Rs 241 in Sikkim. The largest difference in FY 20-21 was Rs 119 (in Kerala).

The Parliamentary Standing Committee has repeatedly criticised the MoRD for this, highlighting the increasing cost of living and noting that the “abysmally low” wages are one of the reasons for worker drop-outs from NREGA.

The second major issue is the disparity in NREGA wages across states, which the Standing Committee has described as “beyond comprehension”, and a violation of Article 39 of the Constitution which provides for equal pay. In FY 25-26, NREGA wages in Haryana and Nagaland differ by as much as Rs 159.

The MoRD’s response to these concerns has consistently been that NREGA is a fall-back option for employment, and that each state has the ability to increase the wages, over and above what the Centre offers, paying the difference from its own coffers. Only Himachal Pradesh, Jharkhand, and Odisha have exercised this option.

Then there is the issue of indexation. CPI-R, which covers households of all rural labourers, is considered a broader and more representative index than CPI-AL, which covers only agricultural households.

Additionally, the MoRD has continued to use 2009 as the base year for indexation, when NREGA wages were capped at Rs 100. The MoRD agreed that the wage rate is “not commensurate with market rates”, but “a conscious decision has been taken so far not to do that”.

A lofty vision, unfulfilled

NREGA was implemented at a time when the daily wage for casual rural/agricultural workers was very low, and workers had next to no bargaining power. Its vision was to ensure livelihood security by providing dignified employment.

Multiple studies have found that rural wages have increased as a by-product of NREGA. Over the years, NREGA has repeatedly served as a lifeline for the rural poor. This was particularly obvious during the Covid-19 pandemic.

The Supreme Court in Sanjit Roy vs State of Rajasthan (1983) had ruled that payment of less than the minimum wage amounts to “forced labour”, punishable under Article 23 of the Constitution. The Standing Committee has echoed this sentiment, recommending that “at least Rs 400 per day should be provided, as the current wage rates are inadequate to meet even basic daily expenses”.

As long as workers do not receive fair wages, NREGA’s vision of a right to dignified work will remain unfulfilled.

Laavanya Tamang is Senior Researcher with the Foundation for Responsive Governance. She is also affiliated with NREGA Sangharsh Morcha.