The Union Budget for 2026-27 has earmarked Rs 95,600 crore for the newly structured Viksit Bharat-G RAM G rural employment scheme, marking an increase of nearly Rs 10,000 crore over the Rs 86,000 crore allocation
made for MGNREGA in the previous financial year, 2025-26.
The enhanced outlay for the newly launched rural employment scheme signals a higher central commitment to rural employment at a time of persistent job stress in agrarian regions. However, the increase also comes alongside a fundamental change in the cost-sharing structure, effectively shifting a significantly larger financial burden onto state governments.
Under the new VB-G RAM G framework, the Centre will fund 60 per cent of the scheme, while states will now be required to contribute the remaining 40 per cent. With the budget allocation, it also points towards the state’s increased financial responsibilities towards the rural employment generation scheme. It marks a sharp departure from MGNREGA’s earlier funding model, where the Centre bore almost the entire wage cost and most of the material expenses, leaving states with only a marginal share.
The new financial sharing formula applies to most states, with the exception of the northeastern and Himalayan states, which will continue to receive the old 90 per cent and 10 per cent Centre-state funding split respectively.
While the Centre’s budgetary allocation has risen in absolute terms and by almost Rs 10,000 crore, state finance departments are already assessing the fiscal impact of the revised structure. Preliminary estimates, calculated by some states, suggest that they could see additional annual liabilities running into thousands of crores, depending on demand for work under the scheme.
A senior officer tracking rural employment spending noted that under MGNREGA, states often struggled with delayed reimbursements despite limited contribution requirements. The expanded cost-sharing under VB-G RAM G could now potentially lead to tighter caps on work generation, particularly in fiscally constrained states.
The government has argued that the new framework aims to improve efficiency, asset creation and convergence with other rural development programmes. However, a section of senior officers points out that MGNREGA’s defining feature was its rights-based guarantee, which mandated work on demand, irrespective of budget ceilings. With VB-G RAM G now operating under a more conventional fiscal model, the extent to which employment demand will be fully met may increasingly depend on the states’ capacity to mobilise funds and pay for the employment generation they do.
