Fall in Centre’s share under VB-G RAM G may force states to cut spending: Nobel laureate

Nobel laureate Abhijit Banerjee on Monday expressed concern that a reduction in the Centre’s funding share under the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G), which has replaced MGNREGA, could lead poorer states to scale back spending, undermining efforts to reduce poverty.

Speaking at the Hyderabad Literary Festival, Banerjee said the declining proportion of federal funding in the new scheme was a key worry.

“I think the thing about G RAM G that worries me is that the fraction of federal funding is being reduced. The fraction of federal funding being reduced means that it’s already true that the poorer states do less. That was always the problem with NREGA,” he said.

Banerjee cautioned that if poorer states end up spending less under the scheme, it would weaken its core objective.

“The poorer states spending less on the scheme would not help the cause of reducing poverty. Now the incentives are created so that the poorer states are even less able to do it. That doesn’t seem to serve the purpose of fighting poverty,” he said.

At the same time, the economist said it was too early to draw firm conclusions, noting that the proposed framework had not yet fully stabilised.

“I think the bill has not yet settled. There is a fair amount of pushback, even from people in the ruling party,” he said, adding that he would prefer to reserve judgement until it becomes clearer how the policy evolves.

According to the Centre, the VB-G RAM G scheme, which has replaced the Mahatma Gandhi National Rural Employment Guarantee Act, 2005, seeks to establish a rural development framework aligned with the national vision of ‘Viksit Bharat 2047’.

The scheme aims to integrate employment generation and livelihood support in rural areas, though critics have raised concerns over changes in funding patterns and implementation mechanisms compared to the earlier employment guarantee programme.