Examine the fiscal federalism implications of the differentiated Centre-State cost-sharing pattern under VB–G RAM G Act, 2025.

The Viksit Bharat–Guarantee for Rozgar and Aajeevika Mission (Gramin) Act, 2025, effective 1 July 2026, repeals MGNREGA and delivers the 125-day guarantee as a Centrally Sponsored Scheme with a differentiated funding formula — 90:10 for North-Eastern and Himalayan States and J&K, 60:40 for other States/UTs with legislature [1][2]. This design is federally equitable in intent but fiscally demanding in practice.

Design and rationale

• Cost-sharing extends to wages, material and administrative costs, unlike MGNREGA where the Centre bore the full wage bill [1].
• The 90:10 tier recognises the narrow revenue base and high delivery costs of special-category and hill States — a principle consistent with Finance Commission-style equalisation [1].

Federal strengths

• Skin-in-the-game funding can improve State ownership, work-site planning and social audit rigour, since States now co-finance outcomes.
• Central share of ₹95,692.31 crore for FY 2026-27 with total outlay above ₹1.51 lakh crore signals continued Union commitment, not withdrawal [1].
• Differentiated ratios embed asymmetric federalism, aligning transfers with fiscal capacity rather than uniform treatment.

Fiscal federalism concerns

• A 40% wage liability is a new, open-ended charge on general-category States; poorer high-demand States like Bihar, Odisha or Jharkhand face the largest burden precisely where demand for work peaks.
• The scheme is demand-driven but State budgets are not — during drought or downturn, matching-share constraints may push States to ration work, blunting the Act's countercyclical safety-net role.
• Larger CSS matching commitments compress States' untied fiscal space, a long-standing concern before successive Finance Commissions.
• Transition risk: fund continuity during changeover has required interim Mother Sanctions and separate wage-rate notifications, demanding tight Centre-State coordination [2][3].

Overall, the differentiated pattern is a defensible attempt to marry equity with shared responsibility, but its success rests on execution. Transparent normative allocations, timely release of the Central share, and a flexible trigger allowing enhanced Union support in distress years would preserve the right to work while respecting State fiscal autonomy — advancing cooperative federalism and the Viksit Bharat @2047 goal of inclusive rural livelihood security.