24 States Allocate Funds for New Rural Jobs Scheme Amidst Centre's Delay
Quick Revision
Twenty-four States and Union Territories have earmarked funds for the new rural employment scheme.
The new scheme is called the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025.
The Act mandates States to bear 40% of the scheme's expenditure.
Relaxations in State contribution are provided for northeastern and hilly States and UTs.
The Union Budget for 2026-27 has allocated ₹95,652 crore as the Centre's share.
States are using their past expenditure under MGNREGA as a baseline for fund allocation.
The new Act extends guaranteed employment from 100 to 125 days.
Himachal Pradesh, despite opposition, allocated ₹143 crore for the scheme.
Karnataka is noted as the only major outlier among States in terms of allocation.
Section 4(5) of the Act mandates the Union government to determine State-wise allocations annually based on objective parameters.
Key Dates
Key Numbers
Visual Insights
New Rural Jobs Scheme: Key Figures (March 2026)
Snapshot of the financial and operational aspects of the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, as of March 2026.
- States/UTs Allocating Funds
- 24
- State's Share of Expenditure
- 40%
- Centre's Share (Union Budget 2026-27)
- ₹95,652 crore
- Guaranteed Employment Days
- 125 days
Indicates proactive commitment from a significant number of states despite central delays, crucial for cooperative federalism.
A significant financial commitment for states, impacting their fiscal health and resource allocation strategies.
Highlights the central government's substantial financial backing for the new rural employment scheme.
An enhancement from the previous 100 days under MGNREGA, providing extended income security to rural households.
Mains & Interview Focus
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The introduction of the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, marks a significant shift in India's rural employment strategy. Moving from a predominantly Centrally-funded model like MGNREGA to a 60:40 Centre-State sharing pattern fundamentally alters the dynamics of fiscal federalism in this critical social sector. This change places a substantial, non-negotiable financial burden on States, irrespective of their individual fiscal capacities or specific developmental needs. Such a top-down mandate, without clear allocation guidelines, risks exacerbating inter-state disparities.
States like Rajasthan, which has already spent over ₹7,597 crore under MGNREGA this financial year, are forced to estimate their share, setting aside ₹4,000 crore. This proactive, yet uncertain, financial planning by States underscores the imperative for the Union government to swiftly release the 'objective parameters' for allocation mandated by Section 4(5) of the Act. Without a transparent and predictable formula, States face considerable budgetary uncertainty, potentially impacting other developmental expenditures.
The Centre's delay in notifying the allocation formula, despite the Act's passage and the Union Budget's allocation of ₹95,652 crore, creates an operational vacuum. While the intent to ensure 'equitable distribution' is laudable, the lack of clarity forces States to rely on historical data, which may not accurately reflect the expanded scope of the new Act, including the extension of guaranteed employment from 100 to 125 days. This ad-hoc approach undermines the spirit of cooperative federalism.
Furthermore, the Centre's criticism of States for potential financial struggles, while simultaneously delaying crucial guidelines, appears contradictory. Himachal Pradesh, despite its political opposition, has allocated ₹143 crore, demonstrating a pragmatic approach to securing central funds. Karnataka's outlier status suggests a deeper resistance to the new funding model. The Union government must prioritize the release of the allocation framework to ensure smooth implementation and prevent financial strain on States, thereby upholding the efficacy of this vital rural employment initiative.
Exam Angles
GS Paper II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
GS Paper II: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.
GS Paper III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
GS Paper III: Inclusive growth and issues arising from it.
GS Paper I: Social empowerment, poverty and developmental issues.
View Detailed Summary
Summary
Many Indian states are setting aside money for a new government scheme that promises jobs in villages, even though the central government hasn't yet told them exactly how much money each state will get. This new law requires states to pay 40% of the scheme's cost, and they are using their old job scheme spending to guess how much they need to contribute.
Twenty-four States and Union Territories have proactively earmarked funds for the upcoming Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025. This move comes despite a delay from the Central government in notifying the specific State-wise allocation formula for the new rural jobs scheme. The Act, slated for implementation from 2025, mandates that States will be responsible for bearing 40% of the scheme's total expenditure, though relaxations are provided for northeastern and hilly regions to ease their financial burden.
The Union Budget 2026-27 has already allocated a substantial ₹95,652 crore as the Centre's share towards this new mission. In the absence of a formal allocation formula from the Centre, States are currently relying on their past expenditure under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) as a baseline. This calculation also accounts for the extended 125 days of guaranteed employment that the new Act promises, an increase from the previous provision.
This development highlights the ongoing dynamics of fiscal federalism in India, where States are preparing for a significant social welfare program even as the Centre finalizes its operational modalities. The scheme is crucial for rural employment generation and poverty alleviation, making it highly relevant for UPSC examinations, particularly in GS Paper II (Polity and Governance - Centre-State relations, government policies) and GS Paper III (Economy - rural development, employment, public finance).
Background
Latest Developments
Frequently Asked Questions
1. What is the most critical difference in the funding model between the new Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, and MGNREGA that UPSC could test?
The primary difference lies in the State's mandatory contribution. Under the new Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, States are mandated to bear 40% of the scheme's total expenditure. In contrast, MGNREGA's funding structure typically involves the Centre bearing 100% of the wage costs for unskilled labour and a significant portion (75%) of the material costs, with States contributing the remaining material costs and administrative expenses.
Exam Tip
UPSC often tests direct comparisons. Remember that the 40% State share is for the *total expenditure* of the new scheme, which is a departure from MGNREGA's component-wise cost-sharing.
2. What specific numbers and dates related to the new rural jobs scheme are crucial for Prelims, and what common traps should an aspirant be aware of?
For Prelims, focus on these key facts:
- •24 States and Union Territories have proactively earmarked funds.
- •The new Act is the 'Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025'. The year '2025' is for the Act's implementation.
- •States are mandated to bear 40% of the scheme's total expenditure.
- •The Union Budget 2026-27 has allocated ₹95,652 crore as the Centre's share.
Exam Tip
A common trap would be confusing the Act's implementation year (2025) with the Union Budget allocation year (2026-27). Also, remember the 40% is the *State's* share, not the Centre's.
3. Why are States proactively allocating funds for the new rural jobs scheme despite the Centre's delay in providing the formal allocation formula?
States are proactively allocating funds because they recognize the critical importance and anticipated benefits of the new rural jobs scheme for their populations. This move signifies their commitment to rural employment and livelihood security. They are likely relying on their past expenditure patterns under similar schemes, like MGNREGA, to make initial budgetary provisions, ensuring they are prepared for the scheme's implementation from 2025.
4. How does the new Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, conceptually align with the broader vision of 'Viksit Bharat' compared to MGNREGA?
The new Act aligns with 'Viksit Bharat' by shifting focus beyond just providing a social safety net, as MGNREGA primarily did. It aims for more comprehensive rural development by emphasizing improved efficiency, integrating skill development, and ensuring better asset creation. This strategic shift is intended to not only provide employment but also to enhance productivity, build durable assets, and foster sustainable income stability, contributing to the overall economic upliftment and development of rural areas.
5. What are the potential implications of the Centre's delay in notifying the State-wise allocation formula for the new rural jobs scheme?
The Centre's delay in notifying the State-wise allocation formula could lead to several implications:
- •Uncertainty for States: While States are making proactive allocations based on past expenditure, a lack of a formal formula creates uncertainty in their financial planning and precise resource allocation for the upcoming scheme.
- •Implementation challenges: Without clear guidelines, States might face initial hurdles in rolling out the scheme uniformly or efficiently, potentially affecting the intended beneficiaries.
- •Potential for disparities: If States continue to rely solely on past expenditure, it might not accurately reflect current needs or address new priorities, potentially leading to uneven development across regions.
- •Coordination issues: It could strain Centre-State coordination, especially if States feel their proactive efforts are not being matched by timely central guidance.
Exam Tip
When analyzing Centre-State relations, always consider both the financial and administrative aspects. The delay impacts both State autonomy in planning and the effective implementation of a national scheme.
6. What key aspects should aspirants monitor in the coming months regarding the implementation of the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025?
Aspirants should monitor the following key developments:
- •Notification of the State-wise allocation formula by the Centre and the details of how it addresses the 40% State contribution, especially for relaxed regions.
- •Specific guidelines and operational frameworks released for the scheme's implementation, including details on skill development and asset creation components.
- •Initial reports or statements from States regarding their preparedness, challenges faced, and the actual rollout of the scheme from 2025.
- •Any amendments or clarifications issued regarding the Act or its rules, particularly concerning the extended guaranteed employment days (e.g., 100 to 125 days mentioned in the background).
Exam Tip
Keep an eye on official government press releases, PIB updates, and reports from parliamentary committees or NITI Aayog for authentic information on implementation progress and policy changes.
Practice Questions (MCQs)
1. Consider the following statements regarding the 'Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025': 1. The Act mandates States to bear 40% of the scheme's expenditure. 2. It guarantees 125 days of employment to rural households. 3. The Union Budget 2026-27 has allocated ₹95,652 crore as the Centre's share for this scheme. Which of the statements given above is/are correct?
- A.1 and 2 only
- B.2 and 3 only
- C.1 and 3 only
- D.1, 2 and 3
Show Answer
Answer: D
Statement 1 is CORRECT: The 'Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025' explicitly mandates States to bear 40% of the scheme's expenditure, with relaxations for northeastern and hilly regions. Statement 2 is CORRECT: The new Act extends the guaranteed employment to 125 days, which is an increase from the previous 100 days under MGNREGA. Statement 3 is CORRECT: The Union Budget 2026-27 has indeed allocated ₹95,652 crore as the Centre's share for this new scheme. All three statements are accurate as per the provided information.
2. Which of the following statements best describes the principle of 'fiscal federalism' in India? A) The Central government has exclusive power to levy all taxes and distribute funds to States. B) States have complete autonomy in financial matters without any central intervention. C) It involves the division of financial powers and responsibilities between the Centre and States, often mediated by bodies like the Finance Commission. D) All financial decisions are made by local self-governments, with the Centre and States playing only an advisory role.
- A.The Central government has exclusive power to levy all taxes and distribute funds to States.
- B.States have complete autonomy in financial matters without any central intervention.
- C.It involves the division of financial powers and responsibilities between the Centre and States, often mediated by bodies like the Finance Commission.
- D.All financial decisions are made by local self-governments, with the Centre and States playing only an advisory role.
Show Answer
Answer: C
Option C correctly defines fiscal federalism. It is a system where financial powers and responsibilities are distributed between different levels of government (Centre, State, and sometimes local). In India, this division is enshrined in the Constitution, with specific lists for taxation powers and expenditure responsibilities. The Finance Commission plays a crucial role in recommending the distribution of tax revenues between the Centre and States and providing grants-in-aid. Option A is incorrect as States also have significant taxation powers. Option B is incorrect as States operate within a framework set by the Centre and the Constitution, and central intervention exists. Option D is incorrect as local self-governments have delegated powers, not primary financial decision-making for the entire nation.
3. With reference to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), consider the following statements: 1. It is a demand-driven wage employment program. 2. The Act guarantees 100 days of wage employment in a financial year to every rural household. 3. Unemployment allowance is payable if employment is not provided within 15 days of applying. Which of the statements given above is/are correct?
- A.1 and 2 only
- B.2 and 3 only
- C.1 and 3 only
- D.1, 2 and 3
Show Answer
Answer: D
Statement 1 is CORRECT: MGNREGA is a demand-driven scheme, meaning employment is provided to those who demand it, rather than a fixed number of days being allocated upfront. Statement 2 is CORRECT: The core provision of MGNREGA is to guarantee 100 days of wage employment in a financial year to every rural household whose adult members volunteer for unskilled manual work. Statement 3 is CORRECT: A key feature of MGNREGA is the provision of unemployment allowance if an applicant is not provided employment within 15 days of submitting their application or from the date on which employment is sought. All three statements accurately describe the features of MGNREGA.
Source Articles
Despite Centre’s delay, States, U.T.s, set aside funds for rural jobs programme - The Hindu
Rules not ready for new rural jobs Act - The Hindu
Union Budget 2026: Activists slam allocation for rural jobs schemes - The Hindu
Opposition’s protest against new rural jobs Act is a failure: Shivraj Singh Chouhan - The Hindu
With new Bill, demand-led rural jobs scheme set to turn supply-driven - The Hindu
About the Author
Anshul MannEconomics Enthusiast & Current Affairs Analyst
Anshul Mann writes about Economy at GKSolver, breaking down complex developments into clear, exam-relevant analysis.
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