NewsStocksGovernment Plans Dual Budget Allocations for MGNREGA and New Rural Employment Scheme During TransitionGovernment Plans Dual Budget Allocations for MGNREGA and New Rural Employment Scheme During Transition
The government plans dual budget allocations for rural employment schemes during the transition from MGNREGA to the new VB-G RAM G program. Minister Shivraj Singh Chouhan announced ₹1.51 trillion proposed for VB-G RAM G with ₹95,600 crore central contribution, while MGNREGA will receive separate adequate funding during the six-month transition period. The new scheme offers 125 days guaranteed employment versus MGNREGA's 100 days but shifts to 60-90% central funding compared to MGNREGA's 100% wage cost coverage.
*this image is generated using AI for illustrative purposes only.
The government is preparing to maintain dual budget allocations for rural employment schemes during the upcoming financial year as it transitions from the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to a new comprehensive rural jobs program. Rural Development and Agriculture Minister Shivraj Singh Chouhan announced that the new Viksit Bharat Guarantee for Rozgar and Ajeevika Mission Gramin (VB-G RAM G) scheme will provide states with a six-month transition period, during which both schemes will operate simultaneously with separate budget provisions.
Proposed Budget Allocations
The government has outlined significant financial commitments for the new rural employment framework:
| Scheme Component: | Allocation Details |
|---|---|
| Total VB-G RAM G Allocation: | ₹1.51 trillion |
| Central Government Contribution: | ₹95,600 crore |
| State Government Contribution: | Balance amount |
| MGNREGA Previous Allocations: | ₹86,000 crore (FY25 & FY26) |
Chouhan confirmed that MGNREGA will receive adequate funding during the transition period, though the specific amount remains undisclosed. "Based on demand, adequate provisions will be made for MGNREGA in the coming financial year during the transition period," he stated, emphasizing that there would be no shortage of work wherever employment is required.
Key Differences Between Schemes
The transition represents a fundamental shift in rural employment policy structure and funding mechanisms:
Employment Guarantee
- VB-G RAM G: 125 days of guaranteed employment per household
- MGNREGA: 100 days of guaranteed employment per household
Funding Structure
| Aspect: | MGNREGA | VB-G RAM G |
|---|---|---|
| Wage Costs: | 100% Central funding | 60% Central (90% for NE/Himalayan states) |
| Material Costs: | 75% Central, 25% State | Included in overall 60%/90% split |
| State Contribution: | 25% of material costs | 40% total (10% for NE/Himalayan states) |
Implementation Strategy
The new scheme introduces significant operational changes designed to enhance effectiveness and local participation. According to Chouhan, works will be identified through Developed Gram Panchayat Plans, with Gram Sabhas and Panchayats determining local priorities rather than following a top-down approach. At least 50% of works will be executed directly through Gram Panchayats instead of contractors, aimed at improving accountability and service delivery.
A senior government official explained that maintaining distinct allocations ensures uninterrupted wage payments and smooth execution of ongoing works while allowing states adequate time to realign their administrative and financial systems. The central government plans to frame rules for seamless transition of existing MGNREGA workers into the new scheme, with normative allocation guidelines for states to be notified soon.
Expert Analysis and Expectations
Policy experts view the transition as a positive development with important implementation considerations. Agricultural policy expert Devinder Sharma welcomed the increased budgetary allocation but emphasized that effective implementation remains crucial to achieve the targeted 125 man-days, noting that average employment under MGNREGA was less than 50.24 days per household in FY25.
Shweta Saini, CEO of Arcus Policy Research, highlighted the scheme's potential multiplier effect through increased employment days and infrastructure creation. However, she cautioned that effective implementation will largely depend on states' financial capacity and administrative preparedness, given the co-funding requirement.
EY India's analysis suggests the higher allocation signals a strategic shift from wage support to development-linked, asset-creating interventions aligned with the Viksit Bharat 2047 vision. Partner Amit Vatsyayan noted that successful execution could boost rural incomes and consumption while creating durable assets in water conservation, irrigation, and rural infrastructure, potentially raising productivity and reducing distress migration.
MGNREGA's Legacy and Challenges
Enacted in September 2005, MGNREGA has provided guaranteed wage employment for rural households undertaking unskilled manual work. The scheme achieved notable successes, including increased women's participation from 48% to 58.15% between FY14 and FY26 through administrative and technological reforms.
However, persistent structural issues have emerged over two decades of implementation. Monitoring across states revealed gaps including missing ground-level work, expenditure mismatches with physical progress, inappropriate use of machinery in labor-intensive projects, and frequent bypassing of digital attendance systems. These challenges resulted in accumulated misappropriation and limited households completing the full 100 days of employment in the post-pandemic period.
The final budget allocations will be determined closer to the budget announcement on February 1st, considering revenue forecasts, economic growth projections, and potential savings in revenue spending.
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