The Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin), or VB-G RAM G Act, 2025, came into force on July 1, 2026, completely overhauling the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005, which had been India’s flagship rural employment guarantee programme for two decades. For Bihar — a state with one of India’s highest rates of rural out-migration, a predominantly agrarian economy, and historically weak own-revenue capacity — this transition carries outsized significance, touching directly on questions of fiscal federalism, rural distress, and the state’s ability to retain its workforce.
Under the new regime, Bihar’s minimum wage rate under the scheme has been raised to the new central floor wage of ₹300 per day, with the state witnessing one of the largest hikes among major Hindi-belt states — a jump of ₹45, one of the four largest increases nationally alongside Uttar Pradesh (₹48), Madhya Pradesh (₹39), and Rajasthan (₹19). However, this welcome wage increase comes bundled with a fundamental structural change: a shift in the Centre-State funding ratio from the earlier roughly 90:10 pattern to a 60:40 pattern, which independent analysis by The Hindu suggests could increase Bihar’s budgetary burden by several multiples compared to previous years.
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This issue deserves dedicated attention because Bihar’s political economy is uniquely dependent on rural employment guarantee schemes. With limited industrial base, high population density on cultivable land, and one of India’s largest interstate migrant labour outflows — to states like Punjab, Haryana, Delhi, Gujarat, and Maharashtra — MGNREGA (and now VB-G RAM G) has functioned as a critical safety valve preventing further distress migration and providing a wage floor for Bihar’s rural poor, particularly during the lean agricultural season.
Background and Context
Five Important Key Points
- VB-G RAM G, which replaced MGNREGA on July 1, 2026, raised Bihar’s daily wage rate by ₹45 — one of the four largest hikes among major states, reflecting the previous gap between Bihar’s MGNREGA wage and the new ₹300 central floor.
- The funding pattern has shifted from a Centre-heavy roughly 90:10 ratio to a 60:40 Centre-State ratio, potentially increasing Bihar’s own expenditure burden dramatically compared to 2024-25 actuals.
- Under the new Act, the Union government will determine a “normative allocation” for each state based on centrally prescribed objective parameters, replacing the earlier fully demand-driven model under MGNREGA.
- States, including Bihar, will now bear full responsibility for any expenditure beyond the normative allocation, including unemployment allowance liabilities and compensation for payment delays — a significant new fiscal risk.
- RJD leaders, including Tejashwi Yadav and Jairam Ramesh of the Congress, have criticised the new wage notification as “unjustifiably low,” while reiterating the demand from the 2024 Lok Sabha campaign’s Shramik Nyay programme for a national minimum wage of ₹400 per day.
Bihar’s Structural Dependence on Rural Employment Guarantee
Bihar has among the highest workforce dependence on agriculture and allied activities in India, coupled with acute land fragmentation due to high population density — among the highest in the country. With limited local industrial and manufacturing employment opportunities, MGNREGA has historically served as Bihar’s most significant rural safety net, especially during agricultural off-seasons when landless labourers and marginal farmers have few alternative income sources. Bihar has also historically recorded chronic under-provision of the guaranteed 100 days of employment under MGNREGA, with implementation frequently criticised for delayed wage payments, technical glitches, and administrative bottlenecks — issues that predate VB-G RAM G and will need urgent attention under the new dispensation.
The Fiscal Federalism Shift and Bihar’s Vulnerability
The most consequential change for Bihar is the funding pattern shift. Under MGNREGA, the Centre bore almost the entirety of wage costs (100%) with States contributing to materials and administrative costs at a 75:25 ratio, resulting in an effective Centre-State split close to 90:10. Under VB-G RAM G, labour wages continue to be Centre-funded, but material costs and administrative expenses now follow a 60:40 Centre-State ratio, with the Centre providing an interim allocation of ₹95,692.31 crore nationally for 2026-27. Given Bihar’s relatively low own-tax revenue base compared to industrialised states, this shift could strain the state’s finances considerably, especially since Bihar recorded one of the largest estimated expenditure increases nationally — potentially between 600% and 800% compared to 2024-25 actual spending, according to The Hindu’s analysis, placing it alongside Uttar Pradesh and Rajasthan among the worst-affected states.
The “Normative Allocation” Model: A Departure from Demand-Driven Guarantee
Perhaps the most fundamental philosophical shift is that VB-G RAM G empowers the Union government to determine a state-specific “normative allocation” — a budgeted spending ceiling — based on centrally prescribed objective parameters, rather than MGNREGA’s original demand-driven model where any registered rural household could demand work and the government was legally obligated to provide it or pay unemployment allowance. For Bihar, with its historically high demand for guaranteed rural work, this shift raises concerns about whether the state’s actual employment demand will be adequately captured in the Centre’s normative calculations, or whether Bihar will be forced to bear disproportionate additional costs beyond the allocated ceiling — including unemployment allowance liabilities if work cannot be guaranteed within stipulated timeframes.
Political Reactions from Bihar and Implications for the Upcoming Assembly Election
The timing of this transition is politically significant, coming amid the run-up to Bihar’s Assembly election. RJD’s Tejashwi Yadav and Congress leader Jairam Ramesh have both criticised the wage notification as inadequate, reviving the Congress’s 2024 Lok Sabha campaign demand under the “Shramik Nyay” programme for a national minimum wage of ₹400 per day, citing the Anoop Satpathy Committee’s 2019 recommendation of a ₹375 minimum wage floor. Given that rural employment and migrant worker welfare are politically salient issues in Bihar — a state that has witnessed repeated migrant distress narratives, particularly during the COVID-19 pandemic — the funding and wage adequacy debate around VB-G RAM G is likely to feature prominently in electoral discourse.
Migration Linkages and Broader Socio-Economic Impact
Bihar sends one of India’s largest interstate migrant worker cohorts to states like Punjab, Haryana, Delhi-NCR, Gujarat, and Maharashtra. A robust, well-funded rural employment guarantee scheme in Bihar can reduce distress-driven out-migration by providing local wage-earning opportunities, particularly benefiting women, elderly workers, and those unable to migrate. Conversely, if VB-G RAM G’s implementation falters in Bihar due to fiscal constraints or administrative capacity gaps, out-migration pressure could intensify, with cascading effects on Bihar’s demographic profile, agricultural labour availability, and social fabric.
Way Forward for Bihar
Bihar’s government must urgently build institutional and fiscal capacity to manage the transition to VB-G RAM G effectively. This includes strengthening panchayat-level implementation infrastructure, ensuring timely wage disbursement through Direct Benefit Transfer to prevent payment delays that have historically plagued the scheme, and proactively negotiating with the Centre for a normative allocation that realistically reflects Bihar’s employment demand rather than being constrained by potentially conservative central parameters. Bihar should also explore convergence with other rural development schemes to maximise resource utilisation, while civil society and Panchayati Raj institutions should be strengthened to ensure grievance redressal mechanisms function effectively at the grassroots level.
Relevance for UPSC and SSC Examinations
For UPSC Mains, this topic is directly relevant to GS Paper II (Government policies and interventions, Centre-State fiscal relations, Panchayati Raj) and GS Paper III (Rural development, employment, inclusive growth). It also connects to GS Paper I (Indian society — poverty and developmental issues, migration). For SSC aspirants, key terms include: MGNREGA 2005, VB-G RAM G Act 2025, normative allocation, Direct Benefit Transfer (DBT), Anoop Satpathy Committee, and Shramik Nyay programme.