States to gain Rs 17,000 crore under VB - G RAM G? Most will remain net gainers despite funding shift; here's what SBI says

The Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (VB-G RAM G) Act is expected to give a boost to state funds, making them collectively gain almost Rs 17,000 crore. Since its introduction, the Bill has sparked debate, particularly over concerns that the revised funding structure could place a higher financial burden on states.

According to a recent report by the State Bank of India (SBI), states will remain net gainers under the proposed Act, with scope to further scale up benefits through their own contributions.




The report said that a simulated, normative assessment based purely on the Centre’s share shows that states could collectively gain about Rs 17,000 crore as compared with the average allocation over the past seven years. The assessment is built on seven parameters, focused on the twin principles of equity and efficiency.

“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 report said.

Another key criticism of the proposed scheme focuses on the shift in the Centre–state funding ratio to 60:40, excluding North-Eastern states, Union Territories and Himalayan states.

However, the report argued that apprehensions about the revised ratio weakening state finances or pushing states towards higher borrowing are misplaced and largely emerging from misunderstanding of state funding. According to SBI, an objective and normative evaluation of the new framework shows an improvement in overall fund distribution to states.

As part of its analysis, SBI calculated each state’s share as a proportion of the total allocation across all states for every parameter. These results were then compared with the average allocations under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) between FY19 and FY25, excluding FY21.

The comparison indicates that, in aggregate, states gain around Rs 17,000 crore relative to the average allocation of the last seven years. The report said only two states recorded marginal losses. In Tamil Nadu’s case, SBI pointed out that if the FY24 allocation outlier, which marked a 29% increase over the FY22–FY23 average, is excluded, the loss becomes negligible.

Meanwhile, the report predicted Uttar Pradesh and Maharashtra to see the biggest gains under the proposed framework, followed by Bihar, Chhattisgarh and Gujarat.

SBI added that adopting objective criteria could strengthen devolution for both developed and lagging states, while preserving a balance between equity and efficiency. It also said states have the opportunity to further improve outcomes by effectively utilising their 40% contribution under the revised funding pattern.

The VB-G RAM G Bill was passed by Parliament during the recently concluded winter session, with the Rajya Sabha clearing the legislation hours after its approval by the Lok Sabha. President Droupadi Murmu gave her assent to the Bill on December 21.

The legislation guarantees 125 days of wage employment per rural household, up from the existing 100 days, for adult members willing to undertake unskilled manual work.

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