Budget 2026-27: India's Stagnant Spending on Jobs and Health

Finance |

Analysed 50+ Sources

New Delhi, India

4 HRS AGO

THE TAKEAWAY

WHY THIS MATTERS?

Context

India's economy relies heavily on agriculture and labor-intensive sectors like textiles, but they contribute little to GDP while supporting nearly half the workforce. Years of underinvestment have left these areas vulnerable, with farmers earning low incomes and workers facing global competition. This matters to regular people because stagnant budgets mean fewer jobs, higher health costs, and less support for education, directly hitting household wallets and future opportunities.

What you gain?

This story shows that India's budget is treading water—spending is just keeping up with inflation, not driving real growth or reform. It's like the government is running to stay in place, avoiding bold moves that could boost productivity or create jobs, which risks leaving millions behind as the economy struggles to modernize.

Why Reported Now?

The trigger is the release of Budget 2026-27 by Finance Minister Nirmala Sitharaman, which reveals flat or declining real-term allocations in key sectors compared to two years ago, highlighting a lack of expansion or reform just as global pressures and domestic needs intensify.

WHO IS IMPACTED

IMPACT ANALYSIS The budget cuts PM-KISAN by over ₹2,600 crore over two years, reducing direct income support that provides ₹6,000 annually per farmer. This mechanically lowers their already modest monthly income of ₹10,000-12,000, making it harder to stabilize earnings amid inflation. Long-term, it risks pushing more households into debt, as they lose a crucial safety net without alternative productivity boosts from schemes like crop insurance, which is also cut by over ₹2,200 crore.

IMPACT ANALYSIS Allocations for the textiles ministry fall back in the latest budget after a brief rise, with PLI schemes flat at ₹405 crore, far below peaks. This means fewer incentives for job creation in a sector critical for absorbing workers leaving agriculture, especially women. Mechanically, it reduces opportunities for semi-skilled employment and wage growth, forcing workers to compete in a shrinking market as global rivals like Vietnam and Bangladesh gain ground, potentially leading to job losses and lower incomes.

IMPACT ANALYSIS The budget shows real-term declines in spending, with core farm schemes like PM-KISAN and crop insurance cut, while increases are small and targeted (e.g., Krishionnati Yojana up ₹5,600 crore). This alters the business model by reducing government support for farmer incomes and risk mitigation, forcing agribusinesses to bear higher costs or face reduced demand. It's a risk because it undermines stability in a politically sensitive sector, potentially leading to lower production and higher food prices, squeezing margins across the supply chain.

IMPACT ANALYSIS Budget allocations for textiles dip from revised estimates, with flagship initiatives like PLI and PM-MITRA showing minimal growth. This changes the business model by limiting subsidies and infrastructure support (e.g., integrated parks), making it harder to compete globally. It's a risk because without fiscal backing, Indian textiles lose ground to countries like Bangladesh, reducing export opportunities and forcing domestic firms to cut costs, potentially leading to layoffs and reduced investment in innovation.

IMPACT ANALYSIS Cuts to crop insurance (PMFBY) and stagnant spending on schemes like PM-AASHA reduce government-backed price support and risk coverage. This market force lowers farmer confidence in planting, potentially reducing supply and increasing price volatility. Price transmission happens as lower subsidies lead to higher out-of-pocket costs for farmers, who may pass these on through higher market prices. It matters because it threatens food security and inflation control, affecting both rural incomes and urban consumers.

IMPACT ANALYSIS India's stagnant textile budget, with flat PLI schemes, reduces competitiveness against Bangladesh's growing textile sector. This diplomatic/economic shift means Bangladesh gains a larger share of global supply chains as India underinvests. It changes relations by increasing trade rivalry, potentially straining bilateral ties. It's strategic because it cedes ground in a labor-intensive industry, limiting India's export growth and job creation while boosting Bangladesh's economic leverage in the region.

IMPACT ANALYSIS ICAR's budget is cut by ₹94 crore in 2026-27, reducing funding for agricultural research. This specific loss limits their ability to develop new technologies or improve crop yields. It impacts their strategy by forcing cuts in R&D projects, slowing innovation that could boost farm productivity. It's significant because it undermines long-term agricultural growth, making it harder for India to address food security and climate challenges, potentially affecting collaborations and grant opportunities.

IMPACT ANALYSIS ICMR receives an increase to ₹4,000 crore in 2026-27, up from ₹3,150 crore, but this is still modest relative to national needs. This benefit allows some expansion in public health research, but mechanically, it's insufficient to tackle India's disease burden. It impacts their stock/strategy by limiting scale compared to international peers, constraining their ability to lead in areas like pandemic preparedness. It's significant because weak health research perpetuates high healthcare costs and poor outcomes, affecting overall economic productivity.

Analysis

Deep Dive Analysis

The Narrative

What does India's latest budget reveal about economic priorities?

India's Budget 2026-27, presented by Finance Minister Nirmala Sitharaman, shows a government treading water rather than making bold moves to address structural economic challenges. While total spending increased to ₹53.5 trillion, this growth barely keeps pace with inflation, leaving critical sectors like agriculture, health, and education with stagnant or declining real-term allocations. The budget comes at a time when India's economy faces intensifying global pressures and domestic needs, with core industries growing only 2.6% year-on-year and tax revenue growth lagging at 3.3%.

How does the budget affect key sectors and vulnerable groups?

The budget's minimal increases in education (to ₹1,39,289 crore) and health (6% increase to ₹1,01,709 crore) fail to address long-standing underinvestment, while family welfare funding actually drops and pollution control budgets are cut. For farmers and workers who constitute nearly half of India's workforce, the budget worsens conditions through real-term cuts in agriculture and health support. The shift from the demand-led MGNREGA program to the supply-driven VB-GRAM G scheme reduces guaranteed work opportunities, particularly affecting women agricultural laborers who rely on seasonal jobs.

What are the government's stated priorities and initiatives?

The government defends the budget as a prudent fiscal plan that prioritizes infrastructure and economic stability, pointing to GDP growth of 7% and a fiscal deficit of 4.3% as signs of strength. Capital spending on infrastructure rises 9% to ₹12.2 trillion, focusing on high-quality investment to sustain growth momentum. New initiatives include a cluster-based industrial approach linking training to sectors like textiles and leather, and the SHE-Mart platform aimed at transitioning women from credit-led livelihoods to enterprise ownership. However, critics note the budget missed opportunities for reforms like GST input tax credits for capital goods that could have lowered business costs.

How do specific budget changes impact women and social programs?

The budget's gender focus appears superficial despite initiatives like SHE-Mart. The replacement of MGNREGA with VB-GRAM G reduces guaranteed work for women in agriculture, and digitization in employment programs has already lowered women's participation due to poor rural connectivity and biometric issues, cutting household coverage from 72 lakh to 41 lakh. Underfunding of childcare and nutrition schemes like Saksham Anganwadi (with only a 5% increase) fails to address child malnutrition and overburdens frontline workers. These changes deepen economic vulnerability for half the population while trading fiscal caution for social stability.

What are the underlying economic weaknesses the budget fails to address?

Beyond surface indicators, the budget reveals structural weaknesses in India's economy. Agriculture and labor-intensive sectors like textiles contribute little to GDP while supporting nearly half the workforce, yet receive inadequate attention. Years of underinvestment have left these areas vulnerable, with farmers earning low incomes and workers facing global competition. The budget's focus on infrastructure and skills doesn't translate into concrete support for sectoral transformation, and MSME measures like bill discounting may help small firms but without broader sectoral boosts, job creation in textiles and agriculture remains limited.

What are the forward-looking implications of this budget approach?

The budget's cautious approach risks leaving millions behind as India's economy struggles to modernize. With states required to bear 40% of VB-GRAM G costs amid falling Finance Commission grants, implementation challenges loom. The government sets ambitious targets like achieving 10% global share in services, but lacks the concrete funding in education and health to support the necessary productivity leaps. As public pressure builds and experts critique the budget's shortcomings in addressing structural challenges, the coming months will reveal whether states can fund new schemes or if revisions become necessary to balance fiscal prudence with social stability and economic growth.

Key Perspectives

Sarkar (Government)

Points to GDP growth of 7%, fiscal deficit of 4.3%, and debt-to-GDP ratio of 55.6% as signs of economic strength amid global uncertainty, but this masks underlying structural weaknesses.
Capital spending on infrastructure rises 9% to ₹12.2 trillion, focusing on high-quality capex to sustain growth momentum, but may not address sectoral stagnation in agriculture and health.

Farmers and Workers

Budget's focus on infrastructure and skills does not address real-term cuts in agriculture and health, worsening income instability for farmers and workers.
Shift from MGNREGA to VB-GRAM G reduces guaranteed work opportunities, hitting women agricultural laborers who rely on seasonal jobs.

Key Facts

Total spending rises to ₹53.5 trillion (up 7.7%), revenue at ₹36.5 trillion (up 7.2%), but tax revenue growth lags at 3.3%, risking fiscal sustainability.
Core industries grew only 2.6% year-on-year in April-December FY26, indicating weak underlying economic momentum despite surface calm.

TIMELINE

CHRONOLOGY OF EVENTS

February 3, 2026

IMPRI panel discussion on 'Employment, Livelihoods, and Union Budget 2026-27'

Forecast

What to Watch Next

Updates to population projections based on post-2011 data

Reason: Outdated demographic data affects policy planning for ageing populations and migration, which could impact budget allocations in future.

Implementation of return-migration policies

Reason: As restrictive immigration regimes abroad may force students back, India needs policies to reintegrate them, affecting job markets and skill utilization.

Progress in digital literacy initiatives for the elderly

Reason: This is crucial for inclusive development and leveraging the 'silver demographic dividend', but current budget lacks focus here.

FAQ

Important Questions

Players

Main Agents & Their Intent

Conclusion

"The budget's gender focus is superficial, with shifts like VB-GRAM G reducing work guarantees and minimal health/education hikes failing women. Long-term, this deepens economic vulnerability for half the population, trading fiscal caution for social stability. Women bear the risk, while the government risks political backlash. Next, watch if states can fund new schemes or if public pressure forces revisions."

NOSIDES.

Sections

Key Figures Index