VB-G RAM G: States to get funds based on finance panel model, Pg8

Key Highlights:

• The Centre will use objective parameters for fund allocation under the new Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G) scheme, replacing MGNREGS from July 1.
• The Ministry of Rural Development released draft rules for Objective Parameters for Normative Allocation Rules, 2026, seeking public comments within 30 days.
• Fund allocation will mirror the horizontal devolution model recommended by the Sixteenth Finance Commission.
• The VB-G RAM G Act proposes a revised cost-sharing formula, with states bearing a higher share compared to MGNREGA.

Detailed Insights:

• The normative allocation for each state will be determined annually based on objective parameters used for horizontal devolution, as recommended by the Sixteenth Finance Commission.
• Performance criteria, including timely wage payments, compliance with social audit requirements, and completion rates of works, may also influence fund allocation.
• For Union Territories, the central government will determine normative allocation based on performance criteria and other appropriate factors.
• The VB-G RAM G Act proposes a cost-sharing formula of 90:10 for 11 states and 60:40 for all other states, shifting from MGNREGA where the Centre covered the entire wage bill and 75% of material and administrative costs.
• The Sixteenth Finance Commission's horizontal devolution formula considers population, demographic performance, area, forest, per capita Gross State Domestic Product (GSDP) distance, and contribution to GDP.

Key Concepts Involved:

• Horizontal Devolution: The distribution of tax revenues collected by the Union government among the states.
• Normative Allocation: The process of determining the appropriate or standard amount of funds to be allocated.
• Gross State Domestic Product (GSDP): A measure of the total value of goods and services produced within a state's boundaries.