The social sector is again the target of spending cuts

Students eat their lunch under the mid-day meal scheme in Vijayawada.
| Photo Credit: The Hindu

The Budget speech mentions six principles of ‘Viksit Bharat’: zero-poverty, quality education, comprehensive healthcare, meaningful employment, inclusion of women in economic activities, and farmers’ well being. This is followed by 10 broad areas that the proposed development measures span. However, Budget figures show that these measures are not sufficiently backed by allocations. This is disappointing given that there is widespread acceptance of not only the economic slowdown, but also the slump in consumption demand. Academics, industry, and civil society have all been recommending demand-side measures to increase the disposable incomes of the poor, lower classes, and the middle class.

Reduced allocations

While agriculture is identified as an engine of growth, there is hardly any increase in allocation for the Department of Agriculture and Farmers’ Welfare — from ₹1.22 lakh crore in 2024-25 (BE) to ₹1.27 lakh crore in 2025-26 (BE). In fact, the current year’s allocation is even less than the RE for 2024-25 (₹1.31 crore). The national mission on oilseeds does not find a mention in the Agriculture budget figures and a measly ₹1,000 crore has been allocated for the mission for pulses. The allocation for food subsidy is also more or less the same as last year (₹2 lakh crore) indicating that there is no hope of pulses and oils being included in the public distribution system. This could have offered stable and affordable prices for consumers, allowing them to spend their incomes on other items. Even the budget for MGNREGS remains stagnant at ₹86,000 crore despite demands from workers’ unions and also the corporate sector for an increase in wages under this scheme.

The Prime Minister’s Package for Employment and Skilling announced last year also does not seem to have really taken off. The allocation for the PM Internship Scheme in 2024-25 was ₹2,000 crore, but reduced to ₹380 crore (RE). However, this year’s allocation is significantly higher at ₹10,780 crore, which would be sufficient to cover about 18 lakh people. The number of registrations so far is only 1,25,000. The aim is to provide one crore internships in five years. Even if the targets are achieved, these internships only pay ₹5,000 per month and there is no guarantee of a job.

It is interesting that the first issue that gets mention in ‘investment’ is ‘investing in people’ and within this, the announcement that the cost norms for the Saksham Anganwadi and Poshan 2.0 ‘will be enhanced appropriately’. Yet, there is hardly any increase for the Saksham Anganwadi — from ₹21,200 crore 2024-25 (BE) to ₹21,960 crore 2025-26 (BE). The actual expenditure for 2023-24, two years ago, was already ₹21,810 crore. These cost norms have not been updated since 2018 and just indexing them to inflation would require higher budgets. If the honorariums of Anganwadi workers and helpers are also increased, as they should be, even higher allocations would be needed.

The ‘investing in the economy’ part focusses mostly on infrastructure projects with an emphasis on public-private partnership mode. This has been tried, but does not seem to have contributed to either recovery in demand or in employment generation.

Reviving demand

While there is excitement over the tax-related announcements for the middle class, it is important to remember that a very small proportion of Indians pay personal income tax and this initiative might be nowhere enough to revive rural and urban demand. Given stagnant rural wages over the last decade and the recent concerns related to urban consumption demand, along with the reverse structural change being observed in the labour market where employment in agriculture is rising, it is clear that much larger amounts of resources need to be pumped into rural areas and towards the lower income classes. There is no point bemoaning the fact that private investment is not forthcoming even though profits have been rising, as the Economic Survey does, while doing nothing to increase incomes of the masses and demand. Investment will only come when there are prospects of added revenue, which clearly the industry is not very buoyant about currently.

What one would therefore have expected from this Budget if it was to make a difference to growth and equity is big spending towards schemes such as MGNREGA along with newer schemes for small and labour-intensive projects, supported by enhanced spending on the social sector. However, budgets for most of these schemes and departments (education, health, social security pensions, mid-day meals) are either stagnant or have increased nominally. The overall Budget figures are also telling: while what the economic situation asks for is an expansionary Budget, we see projected fiscal deficit being lower at 4.4% for 2025-26 from 4.8% for 2024-25 even after taking into account the estimated revenue forgone of ₹1 lakh crore because of the income tax reforms. The total expenditure as a proportion of GDP has also gone down from 14.6% in 2024-25 to 14.2% in 2025-26 with the share of capital expenditure in total expenditure increasing from 27.9% to 30.6%. Obviously, spending has been cut. Once again the target of these cuts is the social sector.

Dipa Sinha, Independent researcher and development economist