The new VB-G RAM G fund sharing model between the Centre and states will be determined by normative assessment. According to an SBI Research report, states are expected to gain approximately Rs 17,000 crore compared to the average allocation of the past seven years. Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India (SBI), highlighted that most states are likely to be net gainers under this model, based on simulated scenarios and distribution weights.
The report outlined a simulated scenario focusing on normative assessment of the Centre’s share, aiming to strike a balance between equity and efficiency. It emphasized two core principles: equity, to support states with higher structural needs and wider administrative spread, and efficiency, to incentivize states translating financial outlays into sustainable employment and asset creation. The assessment criteria were divided into seven attributes under equity and efficiency categories.
The difference between the normative assessment using objective criteria and the average allocation under MGNREGA over FY19-25 (excluding 2020-2021) was calculated. Overall, the states are projected to gain Rs 17,000 crore compared to the average allocation of the last seven years. The report indicated that all states, except for two with minimal losses, would benefit in the hypothetical scenario based on the distribution weights.
States like Uttar Pradesh and Maharashtra are anticipated to be the top gainers, followed by Bihar, Chhattisgarh, and Gujarat. The SBI report suggested that the objective criteria would enhance devolution for both developed and laggard states by maintaining a balance between equity and efficiency. It also noted that states could further improve outcomes through their 40% contribution.
