Budget makes dual allocations for MGNREGA, VB-G RAM G schemes

The government has allocated a combined nearly ₹1.26 trillion in the Union Budget 2026–27 for the new and existing rural jobs guarantee schemes.

Of this, ₹95,692 crore has been earmarked for the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission Gramin (VB-G RAM G) scheme, while the government has set aside ₹30,000 crore for the outgoing Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

In the 2025-26 budget estimates, the government had allocated ₹86,000 crore for MGNREGA.

Mint reported on 21 January that the government was eyeing dual allocations for the two schemes during the transition year.

The VB-G RAM G scheme, to be notified by the Centre, will give states six months to transition from the two-decade-old MGNREGA. Till then, both will continue to operate as usual, necessitating separate budgetary allocations, rural development and agriculture and farmers’ welfare minister Shivraj Singh Chouhan told Mint.

Earlier, the total budget for MGNREGA was ₹86,000 crore, but now the Centre’s share alone has crossed ₹95,600 crore, which will exceed ₹1,51,000 crore when contributions from states are included.

“This is unprecedented and historic in itself, as it will provide fresh momentum to rural India,” said agriculture minister Shivraj Singh Chouhan after the budget announcements.

The VB-G RAM G scheme guarantees 125 days of employment, compared to 100 days in MGNREGA. However, states have to bear higher costs.

Under MGNREGA, the Union government bears 100% of the wage costs, which constitute the bulk of the expenditure, while states contribute 25% of the material costs.

However, under the VB-G Ram G scheme, the Centre will fund only 60% of the total cost in most states, and 90% in north-eastern and Himalayan states, with the state governments funding the balance.

Since the new scheme follows a different funding pattern from MGNREGA, maintaining distinct allocations is to ensure uninterrupted wage payments and smooth execution of ongoing works, while allowing states adequate time to realign administrative and financial systems.

The central government is framing rules for a seamless transition of existing MGNREGA workers into the new scheme, as well as for the normative allocation of funds to states.

Instead of a top-down approach, work will be identified through Developed Gram Panchayat Plans, with gram sabhas and panchayats deciding local priorities.

Also, stronger administrative capacity is expected to improve planning and execution, enhance service delivery, and reinforce accountability, ensuring that the objectives of the new framework are consistently achieved at the village level.

The VB-G RAM G scheme is expected to generate a strong multiplier effect by expanding income opportunities through increased man-days of employment, while simultaneously reinforcing the creation of rural infrastructure, said Shweta Saini, founder and chief executive officer (CEO), Arcus Policy Research.

According to EY India, the government’s indication of a higher allocation for VB-G RAM G signals a strategic shift in rural employment policy from wage support to development-linked, asset-creating interventions aligned with the Viksit Bharat 2047 vision.

According to Chouhan, the budget has “made a historic 21% increase in the budget of the ministry of rural development”.

In line with the recommendations of the 16th Finance Commission, panchayats will receive more than ₹55,900 crore directly, further strengthening the resolve of building a Viksit Bharat, said Chouhan.

The minister also said that the budget has made adequate provisions for the welfare of villages, the poor, farmers, young farmers, and especially our Lakhpati Didis.

In her budget speech, the finance minister proposed setting up community-owned Self-Help Entrepreneur (SHE) Marts to help them take the next step from credit-led livelihoods to ownership of enterprises.

The finance minister also proposed a scheme for the integrated development of 500 reservoirs and Amrit Sarovars, strengthening the fisheries value chain in coastal areas and enabling market linkages involving startups and women-led groups, together with Fish Farmers Producer Organisations.

“Initiatives such as Bharat-VISTAAR will provide AI-based advisories and market insights to boost productivity, diversify incomes and create rural jobs, while investments in storage, cold chains, digital platforms, SHE-Marts for women-led enterprises, skill development, e-market integration and sustainable farming practices together support resilient rural livelihoods and inclusive growth across the agrarian economy,” said Deepak Ballani, director general, the Indian Sugar and Bio-Energy Manufacturers Association (ISMA).