States Expected to Gain ₹17,000 Crore Under New VB-G RAM G Fund Sharing Framework: SBI Report

New Delhi | December 29, 2025 A recent report by the State Bank of India (SBI) suggests that states across India stand to gain around ₹17,000 crore under the proposed new VB-G RAM G fund-sharing framework, compared to average allocations over the last seven years. The framework, designed to balance equity and efficiency in fiscal transfers, could make most states net beneficiaries of central funds. According to the SBI research, the new framework uses a normative assessment approach for the Centre’s share of funds. This approach is based on seven attributes that fall under two main pillars: equity and efficiency. The equity pillar is intended to ensure that states with higher structural needs, larger rural workforce dependence, and broader administrative responsibilities receive adequate fiscal space to meet employment and development demands. Efficiency, on the other hand, is designed to reward states that effectively convert financial allocations into sustainable employment, durable asset creation, and timely wage payments. Soumya Kanti Ghosh, Group Chief Economic Advisor at SBI, explained that the simulated scenario indicates that states could collectively gain about ₹17,000 crore compared to the average allocation of the past seven years. “This estimate shows that under the hypothetical weights and inter-state distribution, most states would emerge as net gainers,” he said. The report notes that only two states may face marginal losses, with Tamil Nadu’s projected loss becoming negligible if the FY24 outlier year is excluded from calculations. Among the states, Uttar Pradesh and Maharashtra are projected to be the top gainers under the new framework, followed by Bihar, Chhattisgarh, and Gujarat. The report highlights that adopting an objective, criteria-based allocation system could improve fund devolution across both developed and lagging states. It also underscores the importance of the states’ 40 percent contribution in enhancing outcomes from the central allocations. The analysis compared the normative assessment with average allocations under MGNREGA during FY19–FY25, excluding FY21. By using objective criteria, the framework seeks to provide transparent and predictable funding, while addressing the unique needs of each state and incentivising efficiency in fund utilisation. The SBI report concludes that the VB-G RAM G framework could help ensure better fiscal management, equitable distribution, and stronger delivery of employment and development programs across India. By linking allocations to performance and need, the framework aims to create a more balanced and effective system of fiscal devolution, benefiting both high-need and high-performing states. This proposed shift in fund allocation methodology reflects an effort to improve financial governance, reduce disparities, and encourage states to optimise the use of central grants to achieve measurable development outcomes. States Expected to Gain ₹17,000 Crore Under New VB-G RAM G Fund Sharing Framework: SBI Report A new report by the State Bank of India (SBI) suggests that states across India could gain around ₹17,000 crore under the proposed VB-G RAM G fund-sharing framework. The framework aims to distribute central funds in a way that balances equity and efficiency, making most states net beneficiaries compared to average allocations over the past seven years. The SBI report explains that the framework uses a normative assessment for the Centre’s share of funds, based on seven criteria divided under equity and efficiency. The equity principle ensures that states with higher structural needs, larger rural populations, and wider administrative responsibilities get sufficient fiscal space to meet employment and development demands. Efficiency rewards states that effectively use funds to create jobs, build assets, and make timely wage payments. According to Soumya Kanti Ghosh, Group Chief Economic Advisor at SBI, this approach shows that most states would benefit. Uttar Pradesh and Maharashtra are projected to be the biggest gainers, followed by Bihar, Chhattisgarh, and Gujarat. Only two states may face minor losses, and Tamil Nadu’s projected loss becomes negligible if an outlier year is excluded from the calculations. The analysis compares the normative assessment with average allocations under MGNREGA between FY19–FY25, excluding FY21. By linking allocations to clear and objective criteria, the framework aims to make fund distribution more transparent, predictable, and fair. It also encourages states to improve outcomes through their 40 percent contribution toward projects. The SBI report highlights that the VB-G RAM G framework could help improve fiscal management, reduce disparities among states, and ensure that central funds are used effectively for development and employment generation. By combining need-based allocation with performance incentives, it aims to support both high-need and high-performing states.