What Happened
- Twenty-four states and Union Territories have set aside funds in their FY2026–27 state budgets for the Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin) — commonly referred to as VB-GRAM(G) — the new rural employment scheme set to replace MGNREGA.
- States are using past expenditure under the MGNREGA as a baseline for their provisional allocations because the Central Government has not yet notified the final formula for state-wise normative allocations under the new Act.
- The central allocation for VB-GRAM(G) is ₹95,692.31 crore in the Union Budget 2026–27; including the 40% state share, the total annual requirement is estimated at ₹1,51,282 crore.
- Union Minister Shivraj Singh Chouhan cited multiple opposition-ruled states — including Jharkhand, Kerala, Punjab, Jammu and Kashmir, Himachal Pradesh, Tamil Nadu, and Telangana — as having already provisioned for their state share, countering opposition claims that the funding model is unworkable.
- The new scheme raises the guaranteed days of wage employment from 100 days (MGNREGA) to 125 days per household per year.
- A key structural change is the shift from a demand-driven model (MGNREGA) to a supply-driven/normative allocation model (VB-GRAM G), which critics argue reduces the entitlement character of the rural jobs guarantee.
Static Topic Bridges
MGNREGA: India's Largest Rural Employment Safety Net
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), enacted in 2005 and operational since February 2006, is one of the largest social protection programmes in the world. It provides a legal guarantee of 100 days of wage employment per year to every rural household whose adult members volunteer to do unskilled manual work. The scheme is demand-driven — meaning the government must provide work within 15 days of application, or pay an unemployment allowance.
- MGNREGA beneficiaries (FY2023–24): approximately 14–15 crore households actively participating.
- Total expenditure: ₹86,000 crore (Centre) in FY2023–24; highest ever was ₹1.11 lakh crore in FY2020–21 (COVID year).
- The scheme is entirely centrally funded for wages; material costs are shared 75:25 (Centre:State).
- MGNREGA has been shown to reduce rural-urban migration during lean agricultural seasons.
- Key implementation body: Gram Panchayat (at least 50% of works must be executed by GP directly).
- The scheme includes provisions for social audit, which is mandated and conducted by independent village-level bodies.
Connection to this news: VB-GRAM(G) inherits MGNREGA's beneficiary base and wage structure but alters the funding model and increases days — the states provisioning budgets are essentially planning continuity of this safety net under a new legislative framework.
VB-GRAM(G) Bill: Key Differences from MGNREGA
The Viksit Bharat–G RAM G Bill, 2025, introduced in Parliament in December 2025, proposes to replace the MGNREGA framework with a new architecture. The core changes reflect the Centre's desire to link rural employment to broader rural development and "Viksit Bharat" (Developed India) goals, while simultaneously restructuring the fiscal burden between Centre and states.
- Employment guarantee: Increased from 100 days to 125 days per household per year.
- Funding model: Centrally Sponsored Scheme (CSS) — 60:40 Centre:State ratio (90:10 for NER/Himalayan states; 100% central for UTs without legislature).
- Supply-driven vs demand-driven: Allocations based on normative formulas, not actual demand — this removes the legal entitlement character.
- Agriculture season restriction: Mandatory 60-day ban on MGNREGA works during peak farming seasons (to discourage diversion of agricultural labour).
- Wage revision: Linked to State Agricultural Minimum Wages — a change from the MGNREGA wage rate notifications.
- New works portfolio: Broader scope including natural resource management, climate-resilient infrastructure, and pradhan mantri gram sadak connectivity works.
- Social audit provisions retained but oversight structure modified.
Connection to this news: The states provisioning funds without knowing the final allocation formula underscores both the urgency of maintaining continuity in rural employment programmes and the concern that normative allocations may provide less funding than demand-based disbursement historically did.
Centre–State Fiscal Federalism and Shared Schemes
The VB-GRAM(G) funding model is part of a broader pattern in Indian fiscal federalism where Centrally Sponsored Schemes (CSS) shift cost-sharing arrangements over time. The 14th and 15th Finance Commissions increased states' share of central tax revenue but simultaneously restructured CSS to require higher state contributions, squeezing state finances in some sectors.
- Centrally Sponsored Schemes (CSS): Currently about 131 schemes across sectors where both Centre and states share costs.
- The 60:40 funding split is the standard for most CSS for general category states.
- States argue that the shift from 100% centrally funded wage costs (MGNREGA) to a 60:40 split for the new scheme imposes a significant new burden — especially for revenue-stressed states.
- Total state own tax revenues as a share of GSDP have been under pressure, making new fiscal commitments challenging.
- The 16th Finance Commission (due to submit report by October 2025) is expected to review CSS burden-sharing formulae.
Connection to this news: The 24 states provisioning funds — despite uncertainty about the final formula — signals that states are prioritising continuity of rural employment support. But the underlying fiscal stress from the new 40% state share remains a structural challenge, particularly for smaller states.
Rural Employment and India's Agricultural Seasonality
MGNREGA and its successor are designed to provide income support during the lean agricultural season (non-Kharif, non-Rabi harvesting periods) when rural households have minimal farm income. The scheme effectively acts as a wage floor for rural casual labour, putting upward pressure on private agricultural wages in surrounding areas.
- Rural poverty (Multidimensional Poverty Index): India reduced MPI poverty from 29.17% (2013–14) to 11.28% (2022–23), a reduction driven partly by social protection programmes including MGNREGA.
- Agricultural calendar: Kharif sowing (June–July), harvest (Oct–Nov); Rabi sowing (Oct–Nov), harvest (March–April) — "lean season" is April–June and December–January.
- MGNREGA works are concentrated in the lean season; the 60-day ban on works during peak season in VB-GRAM(G) aligns work availability with actual surplus labour periods.
- The scheme's wage data (published on the MGNREGA transparency portal) is widely used as a rural wage proxy in economic analysis.
Connection to this news: The transition to VB-GRAM(G) without a finalised allocation formula during the budget season risks creating uncertainty for rural households dependent on these earnings — which is why states are hedging by provisioning based on MGNREGA historical expenditure.
Key Facts & Data
- 24 states and UTs have provisioned VB-GRAM(G) funds in FY2026–27 budgets
- States using MGNREGA past expenditure as baseline (Centre yet to notify normative formula)
- Central allocation: ₹95,692.31 crore (Union Budget 2026–27)
- Total required (Centre + State): ₹1,51,282 crore/year
- Funding ratio: 60:40 (Centre:State) — 90:10 for NER/Himalayan states; 100% Centre for UTs without legislature
- Employment guarantee: Increased from 100 days (MGNREGA) to 125 days (VB-GRAM G)
- Opposition-governed states that have provisioned: Jharkhand, Kerala, Punjab, J&K, Himachal Pradesh, Tamil Nadu, Telangana
- Key structural change: Demand-driven → supply-driven/normative allocation
- MGNREGA (being replaced): enacted 2005, operative Feb 2006; ~14–15 crore households benefited in FY2023–24