 "States will gain ₹17,000 crore due to VB-G RAM G, says SBI paper")
States are set to gain around ₹17,000 crore under the new fund-sharing formula and normative allocation framework of the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin), or VB-G RAM G, which has replaced the 20-year-old MGNREGA, according to a paper by SBI Research.
The gain is calculated against the average allocation under MGNREGA over the past seven years. The paper said the new framework is based on a normative assessment of fund sharing between the Centre and states.
“The fund sharing between the Centre and states under the new VB-G RAM G will be based on normative assessment. We have simulated a hypothetical scenario of normative assessment of only the Centre’s share, ensuring a balance between equity and efficiency,” the paper said.
The hypothetical allocation framework is premised on two core principles – equity and efficiency. Equity aims to ensure that states with higher structural need, greater rural workforce dependence, and wider administrative spread receive adequate fiscal space to meet employment demand. Efficiency seeks to recognise and incentivise states that translate financial outlays into sustained employment, durable asset creation, and timely wage payments.
To simulate the scenario, the paper identified seven parameters, divided between equity and efficiency, and assigned weights to balance the two. It then compared the normative allocation with the average MGNREGA allocation during FY19-FY25, excluding FY21.
“Overall, states gain around ₹17,000 crore when compared to the average allocation of the last seven years. Hence, states will be net gainers. Based on the hypothetical weights and inter-se distribution, all states gain in our scenario barring two, which face marginal losses,” the paper said.
The study estimates that if the legislation is implemented nationwide, the annual requirement for wage, material and administrative components would be ₹1,51,282 crore, inclusive of the state share. Of this, the Centre’s share alone is estimated at ₹95,692.31 crore, or 63 per cent.
This is about 11 per cent higher than the total budget allocation for MGNREGA in FY26 (₹86,000 crore), underscoring the Centre’s continued and substantial fiscal commitment to the scheme, the paper said.
It added that the expanded nature of works under the VB-G RAM G Act should increase the average days of employment, even as the average number of employment days per household has only gradually risen to 50.4 from 45.9.
With active participation by states and a robust penalty mechanism, the revised scheme is expected to bridge the persistent gap between work demanded and work provided – around 14 per cent since FY20 – which the paper attributed to work being misaligned with evolving economic priorities.
The paper also noted that inadequate compensation has long been the Achilles’ heel of MGNREGA, with wage increases in both absolute and real terms remaining patchy over the years, leading to a weak demand-supply equilibrium. This, it said, is expected to improve under the revised scheme.
In a related development, a group of scientists and academics, in an open letter to the government, urged the Centre to undertake ground-level research and consultations to address implementation issues in MGNREGA rather than repealing it through the new Act.
The letter flagged gaps in problem identification and solution design in the new Bill and suggested measures to improve MGNREGA’s implementation.