In the context of rural transformation under Viksit Bharat 2047, evaluate the fiscal federalism implications of the VB-G RAM G scheme, particularly the mandatory 40% state co-funding requirement.

Q. In the context of rural transformation under Viksit Bharat 2047, evaluate the fiscal federalism implications of the VB-G RAM G scheme, particularly the mandatory 40% state co-funding requirement. (15 marks, 250-350 words)

MGNREGA, 2005 financed unskilled wages almost wholly from the Union exchequer. The VB-G RAM G Act, 2025 recasts this Article 41-rooted employment guarantee as a Centrally Sponsored Scheme with 60:40 Centre-State cost sharing [1] — making states co-guarantors of the right to work, a defensible redesign but a fiscally demanding one.

The federal restructuring - Guarantee raised to 125 days; wage, material and administrative costs shared 60:40, 90:10 for North-Eastern and Himalayan states, and fully central for UTs without legislatures [1][2]. - The Centre fixes annual normative state-wise allocations; expenditure beyond that ceiling is borne by the state, as are unemployment allowance and wage-delay compensation [1]. - Scale of the obligation: a central share of about ₹96,000 crore in FY 2026-27, with total outlay crossing ₹1.5 lakh crore once state shares are added [3].

Merits for cooperative federalism - Co-funding gives states genuine stake in outcomes, converting them from passive claimants into active partners in rural development [2]. - Viksit Gram Panchayat Plans and convergence with PM Gati Shakti strengthen Panchayat-level planning under Article 243G and improve asset quality [4]. - The administrative cap raised from 6% to 9% lets states fund monitoring, technology and capacity building [4].

Concerns - Weakened counter-cyclicality: demand for work peaks in drought and distress years, exactly when state revenues contract — a matching-share duty may ration a statutory entitlement. - Inverse equity risk: poorer, high-demand states face the largest 40% bills with the least fiscal headroom. - Normative ceilings shift a demand-driven right towards a budget-capped programme [1]. - Delayed state releases can cascade into delayed wages despite the 15-day payment mandate [1].

On balance, shared financing is a legitimate step towards joint ownership of Viksit Bharat 2047, but it must be matched by capacity. A distress-triggered flexible central window, Finance Commission-linked support for low-capacity states, and transparent normative formulae would ensure the guarantee deepens federal partnership rather than diluting the right to work.

(~325 words)

Sources: 1. The Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB–G RAM G) Bill, 2025 — PRS Legislative Research — 125 days, 60:40 and 90:10 sharing, normative allocation ceilings with states bearing excess, unemployment allowance and wage-delay liability 2. Federal Contribution of Funds under VB-G RAM G — PIB — cooperative-federalism rationale, full central funding for UTs without legislatures 3. Funds under VB-G RAM G — PIB — central share for FY 2026-27 and total programme outlay 4. Viksit Bharat – G RAM G Act, 2025 — PIB — Viksit Gram Panchayat Plans, PM Gati Shakti convergence, administrative expenditure cap raised to 9%