Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission

The Centre has recently notified the draft rules for the Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (VB-G RAM G). The new legislation is set to come into effect from July 1, officially replacing the 20-year-old Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

Key Features of the Draft Rules

Shift in Allocation Strategy

16th Finance Commission Metrics: Normative allocations to States will be determined using the “objective parameters” of the 16th Finance Commission’s horizontal devolution formula.
Prioritizing Poorer and Larger States: The weightage effectively benefits poorer and highly populated states. The criteria include:
- Income Distance (Per capita GSDP Distance): 42.5% (Maximum weightage)
- Population (2011 Census): 17.5%
- Demographic Performance: 10%
- Forest Cover: 10%
- Geographical Area: 10%
- Contribution to GDP: 10%

Introduction of Performance-Based Funding

From the second year onwards, an unspecified percentage of the normative allocation will be tied to state performance.
Performance Indicators include:
- Timely payment of wages.
- Compliance with social audit requirements.
- Percentage of works completed.
- Other indicators to be notified by the Centre.

Institutional Framework

National Level Steering Committee: A 16-member body will be established to recommend decisions related to normative allocations.
Composition: Headed by the Union Rural Development Secretary and will include at least five representatives from State governments (nominated by the Centre).

Transitional Provisions

Continuity of Work: Ongoing MGNREGA works will continue, and pending liabilities will be settled.
Job Cards: Existing e-KYC-verified MGNREGA job cards will remain temporarily valid until new Gramin Rozgar Guarantee Cards are issued.
New Projects: Fresh works can be opened if existing projects fail to meet current labour demand during the transition.

VB-G RAM G vs. MGNREGA: A Paradigm Shift

Feature	MGNREGA (Previous)	VB-G RAM G (New)
Core Approach	Demand-driven: Budget stretched to meet ground-level demand.	Allocation-based: Funding determined by a fixed devolution formula.
Wage Funding	100% funded by the Centre.	60:40 (Centre:State) ratio for most States.
Card Issuance	MGNREGA Job Cards.	Gramin Rozgar Guarantee Cards.
Fund Dispersal	Based purely on the generated work demand.	Tied to 16th FC devolution metrics and State performance criteria.

Significance of the Move

Targeted Poverty Alleviation: By allocating 42.5% weightage to GSDP Distance, the scheme ensures that states with higher poverty levels and fewer resources receive a larger share of central funds.
Enhanced Accountability: Tying future funds to social audits and timely wage payments incentivizes better administrative efficiency at the state and panchayat levels.
Fiscal Restructuring: Moving from an open-ended, demand-driven model to a formula-based model allows the Centre to better project and manage its fiscal deficit.
Focus on Tangible Asset Creation: By making the “percentage of completion of works” a core performance metric for future funding, the scheme shifts the focus from merely generating daily wage-employment to ensuring that durable, productive rural infrastructure is actually completed.
Institutionalizing Cooperative Federalism: The proposed 16-member National Level Steering Committee mandates the inclusion of at least five State representatives. This provides states with a formalized, institutional voice in recommending normative allocations and shaping the administrative framework at the central level.

Potential Concerns

Dilution of the “Rights-Based” Framework: Moving away from a demand-based model raises concerns about whether all individuals seeking work will be guaranteed employment if a State exhausts its allocated quota.
Burden on State Exchequers: Shifting the wage burden from 100% Central funding to a 60:40 ratio may severely strain the finances of economically weaker states.
Ambiguity in Performance Metrics: The draft rules currently leave the exact percentage of performance-linked funding unknown, creating uncertainty for State planning.
Ambiguity in State Financial Planning: The draft rules mention that an “unknown percentage” of future allocations will be determined by performance criteria. This lack of concrete figures creates significant unpredictability, making it exceedingly difficult for state governments to accurately draft their budgets and plan long-term rural welfare projects.
Double Jeopardy for Administratively Weak States: While the 16th Finance Commission formula aims to help poorer states, tying a portion of the funding to stringent “performance criteria” (such as timely wage payments and compliance with social audits) might paradoxically penalize states that already suffer from weak administrative and digital capacities, potentially freezing their funds when they need them the most.

Way Forward

Safeguarding the ‘Guarantee’ Principle: To ensure the scheme remains a reliable safety net of last resort, a ‘contingency corpus’ should be established. This would allow the Centre to dynamically release extra funds during periods of acute agrarian distress or natural calamities, ensuring that the allocation-based cap does not turn away needy workers.
Financial Handholding for States: Given the sudden shift to a 60:40 wage-sharing ratio, economically weaker States might face immediate fiscal strain. The Centre should consider a staggered implementation of this ratio or provide transitional financial assistance to prevent wage delays.
Upholding Cooperative Federalism: The unspecified percentage of funds tied to “performance criteria” must be defined transparently. The National Level Steering Committee should formulate these metrics through consensus with State representatives to ensure states are not unfairly penalized for systemic bottlenecks.
Capacity Building at the Grassroots: Tying funds to timely payments and social audits requires robust local administration. The Centre and States must jointly invest in the digital and administrative capacity of Gram Panchayats—improving internet connectivity and training local officials—rather than merely withholding funds for poor performance.
Seamless Beneficiary Transition: A dedicated transition period with a robust grievance redressal mechanism is crucial. Extensive grassroots awareness campaigns must be deployed to ensure zero exclusion errors while migrating marginalized workers from existing e-KYC job cards to the new Gramin Rozgar Guarantee Cards.
Focusing on Asset Quality: As the scheme shifts towards an allocation-based model, there should be a renewed focus on creating durable, climate-resilient rural assets (like micro-irrigation and water conservation structures) that can genuinely boost the agricultural economy and eventually reduce the long-term dependency on manual wage labour.

UPSC Practice Questions

Prelims (PT) Question

Q. With reference to the recently notified Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (VB-G RAM G), consider the following statements:

It replaces the demand-driven approach of MGNREGA with a normative allocation approach based on the 16th Finance Commission’s horizontal devolution formula.
Under the new scheme, the Centre will bear 100% of the wage expenditure for rural employment.
Income Distance (Per capita GSDP Distance) carries the highest weightage in determining the state-wise allocation of funds.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(d) 1, 2, and 3

Answer: (c) 1 and 3 only

Explanation: Statement 2 is incorrect. The VB-G RAM G shifts the wage bill expenditure from 100% Central funding (under MGNREGA) to a 60:40 ratio between the Centre and States. Statements 1 and 3 are correct as per the draft rules.

Mains Question

Q. “The transition from MGNREGA to the Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (VB-G RAM G) marks a fundamental shift from a rights-based welfare model to an allocation-based model.”

In light of this statement, analyze the key differences between the two schemes and discuss the potential impact of this shift on fiscal federalism and rural employment generation. (250 words)

Hints for Mains Answer:

Introduction: Briefly introduce the replacement of MGNREGA with VB-G RAM G and the core philosophical shift (Demand-driven to Allocation/Formula-based).
Key Differences: Mention the funding pattern change (100% Centre vs 60:40), the use of the 16th FC formula, and the introduction of performance-based incentives.
Impact on Fiscal Federalism: Discuss how the 60:40 ratio increases the financial burden on States, but the inclusion of State representatives in the National Level Steering Committee and the use of the 16th FC formula (favouring poorer states) attempts to balance federal dynamics.
Impact on Rural Employment: Analyze how tying funds to completion rates and social audits might improve asset quality, but capping funds via allocation might fail to address sudden spikes in rural distress (like during a drought or pandemic).
Conclusion: Conclude with the need for robust grievance redressal and ensuring the performance metrics do not penalize marginalized workers for administrative failures.