Initial decline in rural employment scheme VB-G RAM G, too early to assess impact on demand

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VB-G RAM G decline

Highlights

Under VB-G RAM G, 76.7 million person-days were generated in July 2026, which is 49.94% less than the 153.3 million person-days under MGNREGS in the previous year.
Rural inflation in July stood at 4.84%, higher than urban inflation at 3.96%, with weakness seen in both consumer sentiment and sown area.
In the current Kharif season, sowing has covered 35,085 million hectares, which is 20.8% less than the 44.28 million hectares in the same period last year.

This article was translated from the original. Read the original version by our correspondent here.

July data and reasons for transition

According to Forbes India, under the Viksit Bharat, Guarantee for Rozgar and Ajeevika Mission, Gramin, or VB-G RAM G, which replaced the two-decade-old MGNREGS from July 1, 7.67 crore person-days were generated in July 2026, which is 49.94% less than the 15.33 crore person-days under MGNREGS in July 2025. The number of families benefiting from the scheme in July also fell by 51.45% to 68.94 lakh, compared to 1.42 crore a year earlier.

Economists say it is too early to draw broad conclusions from just one month's data. JM Financial Institutional Securities macroeconomist Hitesh Suvarna says that if this decline continues, it could weaken rural demand and increase pressure on vulnerable sections of rural India, with early signs possibly showing as a slowdown in rural demand and a drop in cash flows for microfinance institutions.

According to Renu Kohli, Senior Fellow at the Centre for Social and Economic Progress, it is difficult to assess the scheme based on a single data point. She noted that Bihar, Gujarat, Odisha, Arunachal Pradesh, Mizoram, Sikkim, and Nagaland used the 60-day pause provision in July, which may have reduced the number of workdays.

Ranen Banerjee, Partner and Leader of Economic Advisory at PwC India, says that the revised list of beneficiaries could also be a reason for the decline. According to him, the new Aadhaar-based biometric verification platform may have reduced numbers by removing duplicate entries, while minor transitional disruptions in the first month of implementation are also possible.

Pressure on rural demand, inflation, and agriculture

Rural inflation in July stood at 4.84%, higher than urban inflation at 3.96%. Reserve Bank of India's Rural Consumer Confidence Surveys have indicated a decline in rural consumer sentiment since January 2026, and according to Kohli, the latest survey shows further weakness in both current conditions and future expectations indices.

Indicators related to agriculture also point to pressure. The return of the monsoon in July, amid a strengthening El Niño, helped narrow the gap in Kharif sowing, but according to Ministry of Agriculture and Farmer’s Welfare data, as of July 6, sowing in the current Kharif season covered 35,085 million hectares, which is 20.8% less than the 44.28 million hectares in the same period in 2025. The gap is 39.3% for oilseeds, 21.8% for pulses, and 23% for cotton.

Suvarna says that the risk of weather shocks to the rural economy remains, as reservoir levels are below the long-term average and have barely crossed the halfway mark. However, according to him, sowing conditions have improved over time and there is a growing shift towards non-agricultural work in rural areas, which could provide some relief.

Bank of Baroda's Chief Economist Madan Sabnavis says that high uncertainty could affect overall consumption in the second quarter, especially as food inflation is also rising.

Our previous report discussed July 2026 retail (CPI) inflation remaining at 4.45% and the pressure from food, restaurant, and personal care prices. It also noted that rural inflation remains above urban inflation, and factors like the monsoon and global commodity prices could keep inflation elevated in the coming months, posing risks to future interest rates.

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