VB-G RAM G Bill: From Employment Guarantee to Infrastructure First — What Changes, and Why It Matters

Much of the debate around the VB-G RAM G Bill has focused on three headline shifts: the removal of Mahatma Gandhi’s name, the dilution of the employment “guarantee”, and the redesign of the programme as a centrally sponsored scheme with a 60:40 Union–State funding split. These concerns are not misplaced. But the deeper question is whether the new law meaningfully corrects the weaknesses of the old system — or simply replaces one set of problems with another.

What the Bill is really trying to do

A close reading of the preamble and key provisions — especially Sections 4, 5, 8 and 22 — reveals a decisive reorientation. Unlike Mahatma Gandhi National Rural Employment Guarantee Act, which placed employment at the centre, the new law prioritises rural infrastructure creation across four domains:

• Water security and water-related works
• Core rural infrastructure
• Livelihood-linked infrastructure
• Mitigation of extreme weather events

These activities undoubtedly generate employment, but employment is now incidental rather than guaranteed. The central objective is asset creation, with labour demand flowing from projects rather than the other way around.

Planning shifts from local demand to national templates

Schemes will be prepared by Gram Panchayats under Viksit Gram Panchayat Plans, but these plans must be integrated with the PM Gati Shakti National Master Plan. This alignment improves monitoring and coordination from the Centre’s perspective, but it sharply narrows local discretion.

Panchayats can no longer freely prioritise works based on local labour demand. Instead, they must fit proposals within nationally defined infrastructure categories. Asset logic takes precedence over employment logic.

Limited coverage, not universal entitlement

Unlike MGNREGA’s near-universal applicability, implementation under the new law will be selective. Only Gram Panchayats notified by the Union government will be eligible. While the criteria are yet to be notified, infrastructure deficit is likely to be the primary filter.

This design risks excluding large parts of rural India, particularly areas where distress is acute but project proposals do not neatly align with the four prescribed domains. Panchayats unable to formulate technically compliant proposals may simply be left out.

The employment ‘guarantee’ in name

Section 5(1) raises the notional guarantee from 100 to 125 days of work. However, this promise is structurally weak. Employment depends on project approval, funding availability, and execution timelines.

Where projects are sanctioned but labour supply is insufficient — or where completion deadlines dominate — contractors are likely to replace local workers. In such scenarios, the guarantee becomes operationally hollow, especially during periods of peak rural distress.

The fiscal pivot: from central to shared responsibility

The most consequential shift is financial. What was once a fully centrally funded programme is now a centrally sponsored scheme. States must contribute 40% of the total cost.

In 2025–26, MGNREGA’s allocation stood at ₹86,000 crore, already down from ₹1.15 lakh crore in 2020–21. If the Centre maintains a similar contribution, States together must raise roughly ₹57,000 crore. For fiscally stretched States, this is a tall order. Bihar could need around ₹4,000 crore; Kerala about ₹1,500 crore — sums difficult to mobilise under existing fiscal constraints.

Here, the Fiscal Responsibility and Budget Management Act becomes binding. States that breach deficit limits risk sanctions, making sustained funding uncertain.

How funding bottlenecks translate on the ground

Each year, the Centre announces a normative allocation. States are expected to budget their share, creating a pooled fund that is then devolved to districts and panchayats. On paper, the architecture looks coherent.

In practice, States often commit funds they cannot fully release. When State contributions lag, central releases slow down. Panchayats are left with half-completed works, delayed wages, and mounting liabilities. Contractors then step in to finish projects, undermining both employment generation and accountability.

Administratively, this creates cascading stress across tiers of government.

Why the design leaves little room for course correction

Many procedural rigidities are embedded directly in the Act rather than being left to subordinate rules. This limits flexibility. Had these conditions been rule-based, governments could have adapted implementation in response to emerging problems. As it stands, administrative discretion is constrained precisely where adaptability is most needed.

The likely outcomes

If implemented as drafted, employment will be a secondary by-product rather than a right. Asset creation may remain fragmented, with unfinished or partially completed infrastructure eroding long-term value. Administrative burdens on panchayats will intensify, while trust deficits between the Union and States are likely to deepen.

Pressure to relax fiscal rules will grow, and coordination under the Gati Shakti framework may become more contentious than synergistic.

Whether the VB-G RAM G Bill delivers on its promise will become clear only after a year of implementation. But the early signals suggest a fundamental trade-off: infrastructure first, employment later — with no guarantee that either will be fully realised.