A new analysis by the State Bank of India (SBI) has projected that the recently passed Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (VB-G RAM G) Act will provide a significant financial boost to states. According to the report, states are expected to collectively gain nearly Rs 17,000 crore compared to the average allocations over the past seven years.
Debate Over Funding Structure Addressed
The legislation, which was passed by Parliament in the winter session and received Presidential assent from Droupadi Murmu on December 21, had sparked debate. Critics were concerned that the revised Centre-state funding ratio of 60:40 for most states could impose a higher financial burden. However, the SBI report argues these apprehensions are largely misplaced and stem from a misunderstanding of state funding mechanisms.
The bank's normative assessment, built on seven parameters focusing on equity and efficiency, indicates that most states will emerge as net gainers. "We estimate the States gain around approx. Rs 17,000 crores when compared to average allocation of last 7 years, hinting at a scenario where most of the states will be net gainers," the SBI report stated.
Winners and Marginal Losers
The SBI analysis compared each state's potential share under the new framework with average allocations under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) from FY19 to FY25, excluding the anomalous FY21.
The report predicts the biggest gains will be seen by:
- Uttar Pradesh
- Maharashtra
- Bihar
- Chhattisgarh
- Gujarat
Only two states were found to record marginal losses. In the case of Tamil Nadu, SBI noted that if the outlier high allocation of FY24—which was 29% higher than the FY22-FY23 average—is excluded, the loss becomes negligible.
Enhanced Benefits and State Role
The SBI report emphasized that the objective criteria in the new Act could strengthen fund devolution for both developed and lagging states, maintaining a balance between equity and efficiency. Importantly, it highlighted that states have the opportunity to further scale up benefits by effectively utilizing their 40% contribution under the revised funding pattern.
The VB-G RAM G Act itself guarantees an increase in wage employment days, promising 125 days of work per rural household for adult members willing to do unskilled manual work, up from the existing 100 days under previous schemes.
With the SBI report providing a data-driven counterpoint to the initial concerns, the focus now shifts to implementation and how states leverage their contributions to maximize outcomes for rural employment and livelihoods.
