Congress Calls VB G RAM G Funding Formula an 'Assault on Federalism', Questions Burden on States

A fresh political confrontation has erupted over the Centre's newly introduced Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act (VB G RAM G), with the Congress accusing the Union government of undermining India's federal structure through the scheme's funding model.

The party on Monday alleged that the expenditure sharing formula under the new rural employment programme places an unfair financial burden on states while increasing the Centre's control over welfare spending. The criticism comes just days before the new law is set to replace the nearly two decade old Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) from July 1 .

Leading the attack, Congress General Secretary Jairam Ramesh argued that the Centre has incorrectly applied the 16th Finance Commission's tax devolution formula to determine how expenditure under the new scheme will be shared between the Union and state governments.

According to the Centre's framework, 60 percent of the expenditure under the new programme will be borne by the Union government, while states will contribute the remaining 40 percent . Ramesh contended that the Finance Commission's formula was designed for distributing tax revenues among states and was never intended to determine expenditure sharing for centrally sponsored welfare programmes.

He maintained that grants are traditionally meant to bridge expenditure gaps and ensure balanced development across states. However, with many such grants being discontinued, applying a revenue distribution formula to expenditure allocation, he said, represents another " assault on the already fragile fabric of India's federalism ."

The Congress has also questioned the manner in which the new legislation was enacted. The party alleged that the Centre repealed MGNREGA without meaningful consultations with the Parliamentary Standing Committee on Rural Development , state governments, or other stakeholders who would be directly affected by the transition.

The opposition has consistently argued that MGNREGA was a demand driven, rights based employment guarantee programme , whereas VB G RAM G shifts the model toward an allocation based system where employment opportunities may depend on budgetary allocations rather than actual demand for work.

On Sunday, the Congress released a detailed critique of the legislation, claiming the new Act weakens four key pillars of rural governance: the right to work , fair wages , Panchayati Raj institutions , and state finances . The party also alleged that the law promotes excessive centralisation while reducing the bargaining power of rural labour.

The Centre, however, has projected VB G RAM G as a modernised rural employment framework that aims to provide 125 days of statutory wage employment to rural households, exceeding the employment guarantee available under the previous law. The government has said the revamped legislation is intended to improve implementation while strengthening livelihood opportunities across rural India.

As the new Act prepares to take effect nationwide, the political debate is expected to intensify, with the ruling government defending the reforms as a step towards a more efficient rural employment system, while the Opposition continues to argue that the changes come at the cost of state autonomy and the federal balance that underpins India's governance.