How can I stop my grandma from scolding my kid?

Time to leave.

I think your daughter is a little young for this to be a learning experience for her. And GMa is beyond learning.

Sad as it is, your living there to take care of GMa is not a suitable solution.

Your daughter is too young to undestand Dementia. I agree that living with GMa may not be a good thing with a young child. To be honest, if GMa has children they should be taking care of her. She may need to be an AL if others cannot live with her. I understand that family want to keep Mom in her home but sometimes it isn't plausible. Do what is right for your family.

You CAN'T continue to live there.

You move out, plain and simple. Children abused by their grandparents carry scars for life. You might be able to take the abuse, but little ones cannot.

I'd read a lot about dementia and how people act when they have it. It's not the kind of thing that you can reason with the person, convince them to cooperate or prevent them from saying things. Plus, she likely forgets that you told her to not correct the child. The memory gets worse, so what you said yesterday is not likely to still be around the following day. Plus, their impulse control is lost, as is judgment. I might work on keeping your daughter amused elsewhere so as to not be in grandmother's vacinity OR redirect the child's behavior before grandmother can get to her.

Having a young child in the home with a person with significant dementia can be problematic and concerning for some of the reasons you give. I don't know of anyway to stop grandmother's behavior and it could adversely effect the young child. I'd explore other options. Is there any other family member where your mom may go and live?