To describe Union Finance Minister Nirmala Sitharaman’s Budget for 2026-27 as “lacklustre” would be an understatement. Those who have expressed happiness that she did not pander to populist sentiments may not have to wait too long. Having matched Palaniappan Chidambaram in presenting nine budgets, she would overtake Morarji Desai’s record of presenting ten Union budgets. That is, because one is assuming that she remains in her post and that the Narendra Modi government will be able to complete its third five-year term till May 2029. However, the number of budgets presented is hardly an indication of their quality.
The stock-markets recovered after Bloody Sunday recorded its worst budget day performance in six years. There is little that the FM said that could spur domestic and foreign investments, boost employment, step up revenue collections, or reduce borrowings. The budget acknowledges the failure of at least three much-touted government schemes: the Prime Minister’s internship scheme, the production-linked incentive (PLI), and the Jal Jeevan scheme that aims at providing clean water to every rural household. The revised estimate for the PM’s internship scheme during the current financial year is less than half of what was budgeted for (Rs 10,831 crore); the allocation for the PLI scheme is down by three per cent as the scheme does not seem to have been very effective, other than in the auto sector, and; the revised estimate of the Jal Jeevan scheme for 2025-26 is a sharp fall to Rs 17,000 crore against the budget estimate of Rs 27,000 crore.
To look at the big picture as far as the central government’s borrowings are concerned, it is clearly seeking to milk the country’s central bank and apex monetary authority, the Reserve Bank of India (RBI), as well as government-owned public sector undertakings (PSUs). Dividends from the RBI will comprise nearly half the total non-tax revenues of the government—in fact, it will contribute more to the government coffers than even the largest and most-profitable PSUs, like the Indian Oil Corporation and the Oil and Natural Gas Corporation. It is apprehended by economists that PSUs will curtail their capital expenditures to pay dividends that are, in any case, akin to the government moving money from one pocket to another. This is not exactly good news.
The government appears to have gone slow on its disinvestment programme: roughly 72 per cent of the budget target will be achieved as per the revised estimates for the current financial year. Still, the target for 2026-27 has been hiked to Rs 80,000 crore, the first time the disinvestment target has been increased in five years.
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The Union government’s gross tax revenue is down by almost five per cent in comparison to the budget estimate, and tax collections as a proportion of the Gross Domestic Product (GDP) have slipped. Economist Rathin Roy has stated that total government expenditure as a percentage of the GDP has been stagnant since 2016-17 despite a surge during the pandemic years, 2020-21 and 2021-22.
For the first time, the target for collections of Goods and Services Tax (GST) has been reduced. After GST rates were cut in September 2025, it was hoped that higher consumption would lead to higher tax collections. But that has not happened. On the contrary, household borrowings are at their highest in a decade.
In containing the fiscal deficit by borrowing more instead of raising revenues by taxing the rich, the government has to perforce spend relatively less on capital expenditure and on social welfare (healthcare and education) schemes. There are no surprises here, as this is in keeping with the right-wing regime’s love for neo-liberal economic policies.
It is interesting to note how the government is budgeting for spending on creating jobs in rural areas. Having done away with the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) and replaced it with the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB G RAM G) Act in the winter session of Parliament, the revised estimate for MNREGA is more or less at the level budgeted for (Rs 88,000 crore) with an additional provision of Rs 30,000 crore for the next financial year. It is evident that the funds will not ensure 125 days of work per year for those demanding it.
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Although the central government has reduced its share in the rural jobs programme from 90 per cent to 60 per cent (which has reportedly not made Andhra Pradesh CM N Chandrababu Naidu happy, thereby straining the ruling coalition), the FM has provided for Rs 95,692 crore for implanting the VB G RAM G Act in 2026-27. The takeaway simply is that this government cannot afford to curtail spending on creating employment in villages (and on fertiliser subsidies) at the risk of becoming unpopular.
To say that there was nothing positive in the budget would be churlish. There is recognition of the country’s vulnerabilities in obtaining rare earth minerals and fabrication of semiconductors. Moreover, despite having provided lip service to micro, small and medium enterprises (MSMEs) and little else in the recent past, the budget acknowledges that jobs for the youth can be generated largely by MSMEs in labour-intensive industries like textiles. On the other hand, there have been cuts in the budgetary allocation for providing liquefied petroleum gas (LPG) to the poor, and the cut in the allocation for pollution control is nothing short of callous.
One important announcement in the budget speech that seems to have not attracted much attention will make the two richest men in India even richer. The tax holiday granted to foreign players like Google and Microsoft till 2047, provided they use data centres situated in India, will be a bonanza for the likes of the companies led by Mukesh Ambani and Gautam Adani, whose firms are investing heavily in such centres.
Two cheers for Nirmala Sitharaman!!
The writer is an independent journalist, author, publisher, maker of documentary films and music videos, and an occasional teacher. He can be contacted at paranjoy@gmail.com
