Blasé Capital BUDGET CUTS
There were a number of reports after the Budget related to how the fiscal numbers were a bit wonky, with the central government in a bit of a tight spot. The revised revenue estimates for 2025-26 were lower than the budget ones that were specified last year. The same was true of expenditure, including the one on capital account. This was inevitable as the overwhelming desire of Finance Minister Nirmala Sitharaman was to balance the budget, and keep the fiscal deficit down. In fact, during the entire 90-minute speech, one of the issues that Sitharaman took credit for was that she stuck to her promise to reduce the deficit from the highs during Covid to below-manageable level. To achieve this, given the revenue shortages, she had to slash expenditure. Now, latest media reports indicate that the budgets for most welfare schemes, apart from a rare few, were hacked left, right, and centre.
An analysis of more than 50 welfare schemes, with individual budgets of INR500 crore and more, indicate “widespread downward revisions, and slow fund releases.” The revised estimates (2025-26) for only three, infra management under health ministry, widow pension, and pre-matric scholarship, remained unchanged from the earlier budget allocations. For another three, national rural employment guarantee, post-matric scholarship for STs, and national mission for natural farming, the revised estimates were higher. In the remaining 47 schemes, allocations were “scaled back, often substantially.” In other words, the budget allocations for the 53 schemes were INR5,00,000 crore, which were slashed to INR3,80,000 crore, or nearly a quarter. From any perspective, the cuts are substantial, and prove that the Government finances are in a bad shape. More importantly, this is in a fiscal where the growth rates in the first two quarters were phenomenal, better than expected, or estimated. This implies huge pressures on revenues.
The situation may turn out to be worse than what the revised estimates show. Between April and December 2025, or the first nine months of the fiscal year, the actual expenditure on the 53 welfare schemes were just above 40 per cent of the overall budget estimates, and just over 55 per cent of the much-lower revised estimates. To expect the Centre and states to spend 45 per cent of the revised estimates within three months may lead to two conclusions. Either it will not happen, and the final estimates for 2025-26 that will be presented in the next Budget will be lower than the revised estimates. Else, the states will go helter-skelter to spend money quickly, and chaotically, and waste most of it, or vested interests may siphon off the bulk of the expenditure. Either way, the money will either not be used, or be wasted, which will impact the lives and livelihoods of the poor sections of the population.
In some cases, the situation is pathetic and dismal. According to the media report, “Among high-value schemes with budget allocations exceeding INR2,000 crore (in 2025-26), spending has been especially limited. The Jal Jeevan Mission / National Rural Drinking Water Mission, budgeted at INR67,000 crore, saw releases of only INR31 crore in the first nine months. PM Schools for Rising India recorded spending of INR473 crore against a budget of INR7,500 crore, while the Pradhan Mantri Anusuchit Jaati Abhyuday Yojana utilised just INR40 crore of its INR2,140 crore allocation.” This is a bizarre situation for several reasons. It implies that the first cuts when the Government is in financial trouble is in the welfare schemes, which are the ones that are the most crucial, and required. The second is that there may be no sanctity to the budget announcements, and allocations.
Most ruling regimes announce grand schemes in the budgets, and make loud noises over them. Welfare initiates acquire a veneer and glow, which tell the people how much the governments wish to help them. Yet, when it comes to nuts and bolts, when it comes to brass tacks, the allocations are slashed without any explanations, and logic. If the safe drinking water budget can be cut ruthlessly, imagine what happens to the others, which are more localised and critical. In retrospect, the only reason the revised estimate for the rural employment guarantee scheme is higher may be driven by politics. Recently, the scheme was renamed, and some of its clauses were changed, which became controversial, and were criticised by the Opposition. If the budget was slashed, it would have become a political hot-potato, and the ruling regime would have been unable to handle and manage it. Hence, the allocation was increased to silence the critics, and gain brownie points.
Although this is in the speculative realm, one is not sure how to read the future numbers, the revenue and expenditure figures for the next fiscal year (2026-27). Clearly, if volumes do not pick up, more than expected or estimated, revenue collections will remain under pressure. It now seems that the discussions and debates about the India-US trade deal, geopolitical disruptions, energy sources, rupee fall, and trade deficit were not important. The real rabbit of concern was hidden inside the finance minister’s hat, or in the numbers.
