In a move that’s sparked both optimism and skepticism across India’s fiscal corridors, the newly announced VB-G RAM-G scheme—officially the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission—is set to channel nearly **Rs 17,000 crore** into state coffers. But here’s the twist: this comes alongside a revised **60:40 funding ratio**, where the Centre now contributes 60% instead of the previous higher share. So, are states truly better off? Or is this a clever accounting maneuver masking a deeper fiscal squeeze? A recent report from the State Bank of India (SBI) argues that **most states will remain net gainers**—but the devil, as always, is in the details.
Table of Contents
- What Is the VB-G RAM-G Scheme?
- The Controversial 60:40 Funding Shift, Explained
- SBI Report: How States Stand to Gain Rs 17,000 Crore
- Which States Benefit the Most?
- Potential Risks and Implementation Challenges
- Why This Matters for Jobs and Local Economies
- Conclusion: A Fiscal Win—If Handled Wisely
- Sources
What Is the VB-G RAM-G Scheme?
The VB-G RAM-G scheme is a flagship initiative under the Modi government’s broader “Viksit Bharat” (Developed India) vision. It merges and expands existing employment and livelihood missions—like MGNREGA’s wage components and urban employment drives—into a unified framework aimed at creating sustainable jobs and strengthening social security for vulnerable populations . The “Guarantee” in its name signals a political commitment to ensure livelihood support, especially in rural and semi-urban areas.
Unlike purely discretionary grants, this scheme operates as a tied transfer: states must implement specific programs to access funds, ensuring alignment with national development goals while retaining administrative flexibility.
The Controversial 60:40 Funding Shift, Explained
Historically, many centrally sponsored schemes (CSS) used a 90:10 or 75:25 Centre-state split, especially for special category states. The shift to a **uniform 60:40 ratio** for the VB-G RAM-G scheme has raised eyebrows. Critics argue it **increases the financial burden on states**, many of which are already grappling with revenue shortfalls post-pandemic and rising subsidy demands .
However, the government contends that the **absolute quantum of central allocation has increased significantly**, offsetting the higher state share. In essence, even though states now pay 40%, the total pie is so much larger that their net outlay may actually decrease—or they may even see a surplus.
SBI Report: How States Stand to Gain Rs 17,000 Crore
An in-depth analysis by the State Bank of India’s Economic Research Department offers a data-driven rebuttal to the pessimism. According to their findings, **despite the 60:40 cost-sharing model**, the enhanced central outlay means most states will be **net financial gainers** under the new scheme .
Here’s how the math works:
- The Centre’s baseline allocation across all states has been substantially raised.
- States can amplify their benefits by making **additional voluntary contributions** beyond the mandatory 40%, which the Centre will match up to a cap.
- This “top-up” mechanism allows proactive states—like Tamil Nadu, Kerala, or Maharashtra—to scale up employment programs without bearing the full cost.
Which States Benefit the Most?
While the SBI report doesn’t name every state, it indicates that **high-population and high-implementation-capacity states** are likely to see the largest gains. These include:
- Uttar Pradesh – Given its massive rural workforce and existing MGNREGA infrastructure.
- Bihar and Madhya Pradesh – States with high poverty indices and strong eligibility under the scheme’s targeting criteria.
- West Bengal and Rajasthan – Where state governments have historically invested heavily in rural employment.
Even smaller states could benefit if they leverage the top-up option effectively. The key differentiator isn’t just population—it’s **administrative efficiency and political will**.
Potential Risks and Implementation Challenges
Despite the optimistic projections, several challenges loom large:
Fiscal Pressure on Low-Revenue States
States with weak own-tax revenues (like Jharkhand or Chhattisgarh) may struggle to mobilize the required 40% share, potentially leading to under-implementation or delayed wage payments—undermining the scheme’s very purpose .
Bureaucratic Bottlenecks
Without streamlined digital workflows and capacity building at the district level, the increased funds may not translate into timely job creation or asset generation.
Data Transparency
Independent monitoring will be crucial. Without publicly accessible dashboards tracking fund flow and outcomes, there’s a risk of misallocation or political favoritism.
Why This Matters for Jobs and Local Economies
Beyond the fiscal debate, the VB-G RAM-G scheme could be a lifeline for India’s informal workforce. By guaranteeing 100+ days of employment or skill-linked stipends, it injects liquidity directly into rural households—boosting local demand for goods and services. This multiplier effect is especially vital as urban job markets remain volatile .
Moreover, if states use their top-up funds to invest in **green jobs** (like water conservation or afforestation) or **digital skilling**, the scheme could evolve from a safety net into a springboard for sustainable development—a true embodiment of “Viksit Bharat.”
Conclusion: A Fiscal Win—If Handled Wisely
The VB-G RAM-G scheme represents a bold recalibration of Centre-state fiscal federalism. Yes, the 60:40 ratio demands more from states—but the projected Rs 17,000 crore net gain, as per SBI, suggests this is less a burden and more an **invitation to co-invest in development**. The real test lies in execution. States that act strategically, prioritize transparency, and leverage their matching contributions will not only gain fiscally but also build stronger, more resilient local economies. For a deeper dive into India’s evolving fiscal federalism, see our analysis on [INTERNAL_LINK:centre-state-financial-relations-in-india].
Sources
Times of India: States to gain Rs 17,000 cr under VB-G RAM-G
Union Budget of India – Central Sponsored Schemes Framework