New Delhi, Dec 29 (NationPress) The financial distribution between the Centre and states under the new VB-G RAM G initiative will rely on a normative evaluation, with states projected to receive an additional Rs 17,000 crore compared to the average allocations of the past seven years, according to a report by SBI Research released on Monday.

In a simulated model assessing only the Centre's contribution, utilizing seven attributes based on equity and efficiency, it is estimated that states will benefit by approximately Rs 17,000 crore when juxtaposed with previous allocations, suggesting that most states will emerge as net beneficiaries based on the hypothetical parameters and 'inter-se' distribution,” stated Dr. Soumya Kanti Ghosh, the Group Chief Economic Advisor at the State Bank of India (SBI).

The report crafted a hypothetical scenario focusing on the Centre’s share, ensuring a balance between equity and efficiency.

This allocation framework is founded on two key principles: first, equity, which ensures that states with greater structural needs, higher rural workforce reliance, and extensive administrative coverage receive sufficient fiscal resources to meet employment demands.

“The second principle is efficiency, which acknowledges and incentivizes states that effectively convert financial allocations into sustainable employment, robust asset creation, and timely wage disbursements. We utilized seven criteria divided between equity and efficiency,” the report elaborated.

“We assess the difference between normative evaluation using objective metrics and the average allocation under MGNREGA from FY19-25, excluding the year 2020-2021,” it added.

In summary, states are anticipated to gain around Rs 17,000 crore when contrasted with average allocations over the past seven years. Consequently, the majority of states will be net beneficiaries, with only two states experiencing minimal losses based on the hypothetical weights and distribution.

For Tamil Nadu, when excluding the outlier from FY24 (a 29 percent increase in allocation compared to the averages of FY22 and FY23), the loss becomes insignificant.

“Uttar Pradesh and Maharashtra rank as the top gainers, followed by Bihar, Chhattisgarh, and Gujarat,” as per the report.

Overall, we believe that applying objective criteria will enhance the devolution for both prosperous and underdeveloped states, maintaining a balance between equity and efficiency, the SBI report concluded, noting that states can further improve results through their 40 percent contribution.