The introduction of the Viksit Bharat Guarantee of Rozgar and Ajeevika Mission (Gramin) Act, widely known as the VB G RAM G Act, is bound to substantially change the fiscal environment of rural development in India. Although the shift in the long-standing Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has been characterized by apprehensions over the economic cost of the states, a research report by the State Bank of India (SBI) is more positive. The report concludes that, although there is a move towards a 60:40 funding ratio between the Centre and the States, most of the Indian states are likely to be net gainers. Using a simulation pegged on normative judgment, the SBI report approximates that states might gain about ₹17,000 crore jointly than the common distributions that have been observed in the past seven years.

Core of the SBI report

The core of the findings of the SBI report is that it analyzes the new normative model of funding brought up by the VB G RAM G Act. The MGNREGA that existed previously was mainly demand-based and thus resulted in erratic fiscal outlay and the inconsistent quality of implementation in various regions. The new Act substitutes this with a structured system of normative allocation that is based on seven specific attributes or parameters.

These parameters are based upon the two-fold objectives of equity and efficiency, which makes the funds more objective to be distributed. Through the simulation of this normative examination using the projected share of the Centre, SBI discovered that the reshaped distribution leads to an actual enhancement of the total flow of funds to the states, overturning the discourse that the 60:40 distribution would promptly create a fiscal crisis among local governments.

The controversial reformed cost-sharing equation has been one of the biggest areas of contention. The new rules will see most states contributing 40% of the costs, with the Centre contributing 60%. In the case of North-Eastern and Himalayan states, this is more acceptable at 90:10. The SBI report, however, describes the panic around this revised ratio as being mostly unfounded.

The report maintains that most of the criticism is based on the mere fact that there is no real knowledge regarding state finances. It emphasizes the fact that the new framework offers a more predictable and sustainable financial environment when evaluated by objective criteria, and the states are able to effectively plan their rural infrastructure and employment programs.

Enhanced and SBI analysis offer

The SBI analysis will be able to provide a state-by-state analysis of the group of people who would benefit the most from this legislative change. It is claimed in the report that Uttar Pradesh and Maharashtra are the two leading states under the new system, and next come Bihar, Chhattisgarh, and Gujarat. It implies that even the lagging states of history or even the more developed states can improve their devolution with the introduction of objective criteria.

The report reports that two states of the whole country realized minimal losses in the simulated scenario. Although the report indicated a loss even in Tamil Nadu, which was ostensibly the case, taking out the fiscal year 2024 allocation, which is an outlier, increasing by 29% reduced the apparent loss to insignificance.

The SBI report highlights the fact that the states can increase the fruit of the VB G RAM G structure through a successful use of their 40% contribution. Instead of considering this a burden, the report recommends that the state’s share be leveraged to promote localized priorities and enhance rural development outcomes. The transition to a normative model will also ensure that the regional inequalities that marred the demand-driven system of the past are minimized because the financial resources are allocated fairly and equally.

The VB G RAM G Act, passed by the presidential assent on December 21, 2025, is a landmark legislation that profoundly changes the rural employment policy. Among its major headlines is the rise in guaranteed wage jobs covered by 100 days to 125 days per financial year in every rural household. This 25% expansion of employment guarantee is a substantial initiative in upgrading income security in the rural setting.

Another introduction in the Act is a compulsory 60-day “agricultural pause” on the working season of peak sowing and harvesting. This time is meant to guarantee the availability of labor to do farming activities without artificial inflation of wages, like when the government engaged in the works of producing infrastructure at the expense of private farming.

The renewed focus on the creation of productive and durable assets is another element in the Act. Any work on the scheme is now divided into four thematic verticals: water security, core rural infrastructure, livelihood-related infrastructure, and disaster mitigation. These projects will combine with the PM Gati Shakti National Master Plan and will be registered in the Viksit Bharat National Rural Infrastructure Stack. This integration is important in such a way that labor utilized under the Act is geared towards long-term nationally oriented objectives as opposed to short-term alleviation.

Conclusion

The SBI report offers a solid justification of the financial structure of the VB G RAM G Act, and that the shift to a 60:40 funding ratio is kept in check by a more effective and fairer allocation of the central share. With the emphasis on normative allocations and objective parameters, the new system is likely to increase state coffers by an extra ₹17,000 crore over their past historical averages. Although the states are required to deal with unemployment allowances and some of the administrative expenses, the net benefit of the extended central assistance and planned budgetary process is likely to be higher than the higher-cost sharing locally.