e₹ for Every Worker: Strengthening MGNREGA Through CBDC

Ensuring social security and economic stability for the rural workforce has always been a top priority for the Indian government, as those form critical pillars of inclusive development in the country. Flagship initiatives such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the e-Shram portal are part of this movement, which helps integrate unauthorized workers into the formal economy. However, as the implementation of these schemes faces serious challenges, Central Bank Digital Currency (CBDC) can be a transformative tool against the same by enhancing the efficiency, transparency, and inclusiveness of welfare programs.

Understanding MGNREGA and e-Shram

Passed in 2005 by the parliament of India, MGNREGA offers at least 100 days of guaranteed wage employment in a financial year to every household whose adult members are willing for unskilled manual work [1]. By building the livelihood security of households across the country, it aims to reduce poverty and ensure long-term prosperity. 

• Wage Rate: For FY 2025-26, the Union Ministry of Rural Development has revised the wage rate from ₹349 to ₹370 per person, irrespective of gender [2]. Although this is the standard rate, it can vary based on states and regions.     
• Mode of Payment: Direct Benefit Transfer (DBT) through Aadhaar-Based Payment System (ABPS) and National Automated Clearing House (NACH), depending upon the ABPS status of the beneficiary, ensures timely wage disbursement [3].
• Scheme at a glance: 11.88 active workers from 2.5 Crores of households are benefited in FY 2025-26 through 8.29 crores of DBT transactions [4].    

e-Shram, launched by the Ministry of Labour and Employment, India, in 2021, is a national database of unorganized workers (NDUW) promoting their welfare and social security [5]. As the details are seeded with Aadhaar, a unique account number will be provided to each laborer to streamline their access to government schemes. 

Persistent payment problems

Despite the adoption of the DBT mechanism, there are persisting issues with wage disbursement to beneficiaries under these schemes.

• Based on an analysis done on 3.2 crore transactions from FY 2021-22, 63% of the wages were delayed beyond 7 days [6].
• As the nationwide implementation of ABPS was made mandatory, many employees were unable to fulfill the requirements. In 2024 alone, this delayed payment of more than 67 million employees. Also, about 8.2 crores of active workers were deleted from the scheme between October 2023 to October 2024, citing ineligibility [7]. 
• There was a delay in the disbursement in the FY 2024-25 as well, with INR 974.38 Cr as unpaid wages [8].
• Inadequate funds released are another issue, as the budget allocation for MGNREGA is always less than the required level to meet rural employment demand [9].

CBDC: A Game Changer for Welfare Delivery

India’s e₹, the digital currency issued by the RBI, is a sovereign which holds the same value as physical currency. Using a digital wallet and by adopting cutting-edge technologies, CBDC has made money transfer a hassle-free process without any intermediaries. Hence, the systematic inefficiencies faced in MGNREGA and e-Shram can be easily addressed by integrating the amount disbursal network to CBDC. 

1. Direct transfers to beneficiaries: As CBDC allows DBT, fund diversion or misuse can be avoided by disbursing the money directly to the digital wallets of employees without involving any intermediaries. 
2. Instant, Real-time settlements: Instant credit of wages to beneficiaries and real-time settlement at the bank’s end are ensured as CBDC offers real-time payment clearance. 
3. Offline functionality: Considering the rural population and lack of internet connectivity in remote areas, the offline functionality of CBDC will be an added advantage as it can enhance financial inclusion and address the network concerns.
4. Programmable money: If the money is programmed for certain use cases with restrictions as offered by CBDC, unauthorized transactions can be restricted to achieve the final objectives of welfare schemes.
5. Transparency and auditability: As CBDC transactions are transparently logged and verified, enhanced security is ensured, and fake records, duplicate entries, and ghost beneficiaries can be avoided. 
6. Reduced cost: CBDC can reduce transaction failures, dependence on banking infrastructure, and involvement of intermediaries/third-party agents, which can significantly reduce the administrative costs of running large-scale welfare schemes. 

Roadmap for CBDC Integration

1. Pilot Projects: Start the CBDC-based disbursal in high-volume MGNREGA districts with good digital connectivity. 
2. Link to e-Shram: Integrate e-Shram UAN, Aadhaar, and mobile numbers with CBDC wallets to avoid duplicates
3. Program Management: Upon job completion and attendance verification, use smart contracts to do the validation checks and automated wage disbursal.
4. Capacity Building: Organize awareness campaigns with ASHA workers and panchayats to support digital onboarding and wallet management.

Digital Rupee in Welfare

Even though India is in the transition state of digital revolution in welfare delivery, CBDC integration to schemes like MGNREGA and e-Shram can move the country closer to real-time, transparent, and inclusive governance. This can change the way citizens are being paid, not just faster, but fairer, safer, and smarter.

References

1.Wikipedia contributors. (2025c, May 25). Mahatma Gandhi National Rural Employment Guarantee Act, 2005. Wikipedia. https://en.wikipedia.org/wiki/Mahatma_Gandhi_National_Rural_Employment_Guarantee_Act,_2005

2. The Hindu Bureau. (2025, March 31). MGNREGA wage revised from ₹349 to ₹370 a day from April 1. The Hindu. https://www.thehindu.com/news/national/karnataka/mgnrega-wage-revised-to-370-a-day-from-april-1/article69395963.ece

3. https://rural.gov.in/en/press-release/mixed-payment-mode-mgnregs-wages-continue-till-31st-march-through-abps-and-nach#:~:text=The%20payment%20of%20wages%20to%20every%20beneficiary,upon%20the%20ABPS%20status%20of%20the%20beneficiary.&text=The%20ABPS%2C%20as%20one%20of%20the%20routes,was%20introduced%20for%20timely%20payment%20of%20wages.

4. https://nrega.nic.in/MGNREGA_new/Nrega_home.aspx

5. E-Shram: one stop solution for unorganised workers. (n.d.). https://www.pib.gov.in/PressReleasePage.aspx?PRID=2099153

6. The Hindu Bureau. (2024, December 4). MGNREGA workers term government claim of timely wage payment ‘false.’ The Hindu. https://www.thehindu.com/news/national/mgnrega-workers-term-govt-claim-of-timely-wage-payment-false/article68947266.ece

7. Himanshu Nitnaware, & Himanshu Nitnaware. (2024, October 25). MGNREGS: Millions affected as Aadhar linking woes result in rural workers’ account deletion, payment delays. Down to Earth. https://www.downtoearth.org.in/governance/mgnregs-millions-affected-as-aadhar-linking-woes-result-in-rural-workers-account-deletion-payment-delays

8. Jadhav, V., Jadhav, V., & Indiaspend. (2025, March 12). #DataVIZ: Unpaid wages, fund delays persist under MGNREGS. Indiaspend. https://www.indiaspend.com/data-viz/dataviz-unpaid-wages-fund-delays-persist-under-mgnregs-9451579. Delays in MGNREGA wages. (n.d.). Drishti IAS. https://www.drishtiias.com/daily-updates/daily-news-analysis/delays-in-mgnrega-wages