States to get VB-G RAM G funds based on 16th Finance Commission formula

📌 Summary:

• The Centre will adopt "objective parameters" for normative allocation of funds under the Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin), or VB-G RAM G, which will be rolled out from July 1, 2026, replacing the two-decade-old MGNREGS

• The Ministry of Rural Development released the draft Objective Parameters for Normative Allocation Rules, 2026 (open for public comments for 30 days); allocation to states will use the horizontal devolution formula recommended by the 16th Finance Commission

• The 16th Finance Commission's horizontal devolution formula has six parameters: population (2011 Census) 17.5 percent, demographic performance 10 percent, area 10 percent, forest 10 percent, per capita GSDP distance 42.5 percent, and contribution to GDP 10 percent

• Key shift: VB-G RAM G changes the funding pattern from MGNREGA — under which the Centre paid 100 percent of the wage bill — to a Centrally Sponsored Scheme with 90:10 Centre-state sharing for 11 states (NE/Himalayan states and UTs with legislature) and 60:40 for all other states

• VB-G RAM G guarantees 125 days of unskilled wage employment per rural household per year; the Opposition has criticised the normative allocation concept and Section 22 fund-sharing, arguing MGNREGS allocations were demand-driven, not formula-driven

🎯 UPSC Relevance: GS2 Polity and Governance — fiscal federalism, Centre-state financial relations, the role of the Finance Commission, and the design of rural employment guarantee schemes.

📝 Prelims Facts:

• VB-G RAM G Act was enacted in December 2025; the scheme begins July 1, 2026 and replaces MGNREGA (2005)

• The 16th Finance Commission's formula gives the highest weight (42.5 percent) to per capita GSDP/income distance

• VB-G RAM G guarantees 125 days of work; MGNREGS guaranteed 100 days

🔑 Key Term: Horizontal devolution — the formula-based distribution of the divisible pool of central taxes (and, here, scheme funds) among states, as recommended by the Finance Commission.