The 85-minute presentation of the Union Budget 2026-27 by Finance Minister Nirmala Sitharaman did not dive into broad strategies or the overall approach underlying the myriad schemes and the numbers. In that sense, we heard a slew of items on the agenda, but not with the clarity on critical directional issues required at this time of international turmoil and its cascading effects that are showing up on the domestic economy. Instead, the FM spent too much time on the minutiae of the expenditure on different schemes. There was no unfolding of the big picture.
The main expenditure is on capital goods. The budget proposes to spend Rs 17.15 lakh crore on creating capital assets. This is, clearly, a positive takeaway. Capex builds for the future and is an investment that is meant to deliver long-term physical assets offering a multiplier effect; it can also attract private investment as it stimulates demand in the economy. As regards the budget expenditure, the highest share in the total expenditure is on interest payment or debt servicing (26.2%), followed by allocations made to the defence (14.67%) and transport (11.2%) sectors. We remain low in expenditure on the critical sectors of education, health, and social welfare.
The emphasis on Viksit Bharat is to be welcomed, but there remain important questions in terms of the direction of this development and what the nature of this development ought to be in an India where inequality remains high, health services are poor, and the gaps in education pose many challenges that have been highlighted time and again. This raises the question of priorities, considering that with a population which is not healthy and is poorly educated, the nation will struggle to place itself on the path to its lofty, stated goals of development.
Our experience in the last decade shows that unless both the education and health sectors are placed under the government’s management, their scope cannot cover the bottom 40% of the country’s population. Yet, matters have moved in the reverse direction in recent years, and the Union Budget has been unable, or is unwilling, to take a bold stance on this. Note that the push towards privatisation of health, which is most visible in the rise of private equity investments in hospitals, is a trend that, in effect, works to raise the costs of treatment and reduce access to healthcare, not widen it.
Next, the expenditure on centrally sponsored schemes in the current year is much less than the expenditure that was budgeted last year. That is, it does not appear that the government is seriously pursuing these schemes. And where there is an increase, it has been marginal. Considering the price rise, one can state that overall, the expenditure on the centrally sponsored schemes has remained almost stagnant. This reveals a picture of schemes that cannot attain their intended or advertised objectives.
The expenditure on scientific departments is a mere 1.04% of the budget expenditure. How will the country achieve the goals of Viksit Bharat without substantial investment in evidence-based, high-quality scientific research and innovation? Considering that India is lagging far behind other emerging countries in research and development, this number is worrying. Anecdotal evidence shows that scientific temper has taken a serious hit in the country, and money is reportedly being spent on research that may not meet the strict demands of modern science. A clear allocation with a cautionary note on where this money would go would have helped address these apprehensions.
Navigating the challenges
The Budget does not cover some of the key areas of concern where the government’s intervention was being urgently sought. For instance, the struggles of the Micro, Small and Medium Enterprises (MSME) sector, the rising inequalities of wealth and income, and the fallout of climate change. The MSMEs are expected to play a critical role in the implementation of the recently signed free trade agreement between the European Union and India. The realisation of the landmark trade agreement will hinge on the efficiency with which India navigates the non-tariff barriers – the FTA requires that the production of goods is of a prescribed quality and compliant with the European bloc’s stringent norms on environment and labour participation. In a country where the MSMEs have been found wanting in adherence to these norms, the Union Budget should have offered a policy direction, but it did not.
The road to Viksit Bharat will remain bumpy if the country fails to address its inequalities. Again, the Budget did not offer direction to bridge these gaps. The government, it appears, has limited its climate action strategies to the adoption of renewables, without assigning due priority to the massive threat of air pollution, flooding, and deforestation.
Unemployment has been on the rise in the country. The Union Budget does not engage with the problem either. Overall, this has been an effort anchored in pragmatism and messaging – a statement of guarded optimism that does not chart an assured course towards sustainable, inclusive development.
(The writer is a professor of Economics at the Centre For Development Alternatives, Ahmedabad, and Associate, Levy Economics Institute of Bard College, New York; Syndicate: The Billion Press)
(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.)