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| Relevance: GS-II (Welfare Schemes); GS-III (Government Budgeting, Fiscal Federalism) | Source: MoRD Press Release, July 2026 |
| On 1 July 2026, the new Viksit Bharat – Guarantee for Rozgar and Aajeevika Mission (VB-G RAM G) Act, 2025 officially replaced the 21-year-old MGNREGA. The Centre calls this a historic step toward its ‘Viksit Bharat’ vision. However, many State governments are unhappy, calling it a huge new financial burden put on them without proper discussion. |
1 · What actually changes on the ground?
| The Big Shift — Fixed Budgets (Normative Allocation): Under MGNREGA, funding was open-ended based on demand. Now, the Centre gives each State a strictly fixed annual budget limit. If a State needs more money to provide work, it has to pay completely from its own pocket. |
Passed in December 2025, this law brings four massive changes to how rural India works. First, the promised work days increase from 100 to 125 days per household. Second, the funding is no longer fully handled by the Centre. Now, the Centre and most States will split the total cost in a 60:40 ratio.
Third, the new “fixed budget” system replaces the old demand-based system. Finally, all scheme works must completely stop for a 60-day pause window during peak farming seasons (sowing and harvesting), so farmers don’t face labor shortages.
2 · Four core changes at a glance
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Section 3(1)
125 Days Guarantee
Work guarantee moves from 100 to 125 days per household. Admin budget limit is also raised from 6% to 9%.
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Section 22(2)
60:40 Funding Split
Shifts to a 60:40 cost-sharing model between Centre and most States. (Himalayan/NE states keep the 90:10 ratio).
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Section 4(5) & 4(6)
Fixed Allocation
The Centre sets a strict budget cap. Anything spent beyond this must be paid fully by the State government.
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Section 6(1) & 6(2)
60-Day Pause
A compulsory 60-day blackout during peak farming seasons where no scheme work is allowed.
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3 · Why is this controversial?
- The Money Problem for States: Because States now have to pay 40% of the total bill, their financial burden has skyrocketed. For instance, Bihar’s estimated liability jumped from ₹4,477 crore to almost ₹16,000 crore. Both ruling and opposition states are protesting this.
- From ‘Rights’ to ‘Rationing’: MGNREGA made the Right to Work (inspired by Article 41) a legal guarantee. Under the new law, if the Centre’s fixed budget runs out, states either have to deny work or empty their own treasuries to pay for it.
- Losing the “Shock Absorber”: During the COVID-19 lockdown, MGNREGA’s demand-driven model acted as a lifesaver, generating a record 389 crore workdays. Critics worry a rigid, fixed-budget system won’t be able to respond quickly to future disasters or sudden rural distress.
| The Bottom Line: VB-G RAM G aims to modernise rural jobs by focusing on durable assets and linking with digital systems like PM Gati Shakti. However, its true test will be whether it can still act as a reliable safety net for the poor during tough times, and whether cash-strapped States can actually afford their new 40% share. |
| UPSC Prelims Quick Facts | ||||||||
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| Prelims Practice Question |
Q. Consider the following statements regarding the VB-G RAM G Act, 2025:
Which of the statements given above is/are correct? |
Answer: (c) 1 and 3 only
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