In the history of Indian democracy, the Union government’s annual budget has always carried great significance. However, the 2026–27 budget raises several alarming concerns for rural India. In particular, the vague provisions of the VBG–Ram Ji scheme and major changes to the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) have put the future of rural workers at risk. A deeper reading of the budget reveals that these changes are not merely administrative but are closely tied to political and economic priorities that will have far-reaching consequences for millions of rural households.
A serious problem emerges from the budget documents regarding the VBG–Ram Ji scheme. There is no clarity on when and where the scheme will be implemented. Nor is there any information on how funds will be allocated across states or how the transition from MGNREGA to this new scheme will be managed. This uncertainty has placed state governments in an impossible position, forcing them to implement major budgetary changes blindly. Not only state governments but even senior officials appear confused, raising serious doubts about the scheme’s successful implementation. The central government must urgently end this ambiguity and release detailed information on the VBG–Ram Ji scheme; otherwise, rural development programmes risk coming to a halt.
Under the new scheme, every household has been promised 125 days of guaranteed employment. Yet only 42 percent of the required budgetary allocation has been provided, indicating that the guarantee exists largely on paper. Estimates suggest that to provide 125 days of work to all active MGNREGA-registered households, the total VBG–Ram Ji budget should be at least ₹3.84 lakh crore, of which the Centre’s 60 percent share would amount to ₹2.30 lakh crore. Instead, the budget allocates only ₹95,692 crore, just 42 percent of what is required. More worryingly, to actually provide 125 days of employment to every registered household, the budget would need to be close to ₹7 lakh crore, which is practically impossible under the current framework. This clearly exposes the government’s guarantee as rhetorical rather than real.
When the states’ share is factored in, the situation appears even more bleak. If the central allocation of ₹95,692 crore is treated as 60 percent, the states’ contribution would be ₹63,795 crore, taking the total allocation to ₹1.59 lakh crore. This would translate into an average of only 52 days of work per active household—less than half of the promised 125 days. Under existing guidelines, states must match central allocations with their own spending. To provide 125 days of employment, states would therefore have to spend more than ₹2 lakh crore, a sum well beyond their financial capacity.
According to MGNREGA analyses, the financial year 2025–26 is likely to end with arrears of at least ₹11,000 crore. If arrears from states such as West Bengal are included, the total could rise by another ₹15,000 crore. In 2026–27, nearly half of the ₹30,000 crore allocated for MGNREGA is likely to be used merely to clear past dues. Yet the central government has not clarified the purpose of this allocation. If it is meant to support MGNREGA work during the first quarter, when the VBG–Ram Ji programme begins, it will be wholly inadequate. There is also no clarity on how workers will be supported during the summer months, traditionally the peak season for MGNREGA employment. This uncertainty threatens the livelihoods of millions of rural families.
The broader reality is that the country’s resources and labour are being sacrificed at the altar of corporate-led development. Last year’s budget stood at ₹50.65 lakh crore, accompanied by grand claims of welfare-driven growth. Eighteen flagship schemes of the Modi government were promoted as vehicles of transformation, including the National Ayush Mission, PM Shri, Ayushman Bharat Health Infrastructure Mission, PM Awas Yojana (Rural and Urban), PM Awas Yojana Urban 2.0, the Urban Challenge Fund, the Jal Jeevan Mission, PM Gram Sadak Yojana, the PM Internship Scheme, Research and Innovation initiatives, and the India Artificial Intelligence Mission.
Yet only ₹2.23 lakh crore was allocated to these schemes—just 0.44 percent of the total budget. Even this meagre allocation was questioned for its inadequacy, and critics were branded anti-national and anti-development. The latest budget now reveals that these schemes have effectively collapsed, as even this insufficient allocation was not fully utilised. Of the ₹2.23 lakh crore allocated, only ₹81,350 crore was spent—36.49 percent of the allocation and a mere 0.16 percent of the total budget. As a result, India’s 1.4 billion people were forced to pay out of their own pockets for health, education, housing, employment, and other basic necessities.
It increasingly appears that India can aspire to become a “Vishwaguru” only by turning into a repository of ignorance and humiliation. Over the past eleven years, while the overall budget has expanded, public welfare expenditure has steadily declined. This year’s budget allocates only ₹2.12 lakh crore for these schemes—less than last year—despite the total budget rising to over ₹53.47 lakh crore. After accounting for inflation, the real allocation amounts to just 0.37 percent of the total budget. Even this amount is unlikely to be fully spent, with actual expenditure expected to remain below ₹77,000 crore. The pattern is clear: large allocations are announced, but the government’s policy is not to spend them.
For nearly two decades, MGNREGA has been a lifeline for rural India and proved its value during the COVID-19 pandemic by sustaining livelihoods and supporting agricultural growth during a global crisis. This demand-driven programme has now been dismantled and replaced with the allocation-driven VBG–Ram Ji scheme, referred to as Gram Ji in the government’s language. While MGNREGA aimed to provide employment to rural households, Gram Ji focuses on creating rural infrastructure networks aligned with corporate interests. Although ₹95,692 crore has been allocated—roughly equal to last year’s MGNREGA expenditure—this amount will not be spent unless states contribute ₹63,795 crore, which remains highly uncertain.
Given the steady erosion of state resources and revenue autonomy, such contributions are far from guaranteed. Under centrally sponsored schemes, Finance Commission grants, and other transfers, states received ₹2,03,801 crore less than budgeted in the current financial year. Despite this, the 2026–27 budget further reduces state transfers by ₹69,456 crore compared to the previous year’s estimates. Even as their funds are curtailed, states are compelled to contribute 40 percent to central schemes like MGNREGA.
If states divert funds to meet these obligations, they will be forced to slash their own welfare programmes. Ironically, it is state-led social development initiatives that have driven much of India’s progress, even as the Centre’s per capita contribution to welfare has declined over the past decade. The Modi government’s approach thus undermines not only cooperative federalism but also the constitutional spirit of centre–state relations. Eroding state rights may serve short-term political ends, but it cannot deliver sustainable national development.
The optimistic narrative of the Economic Survey has been punctured by the budget itself, as tax concessions to corporations and the wealthy have sharply reduced revenue. Tax receipts for the current year are estimated at ₹26.74 lakh crore, far below budgeted levels. For 2026–27, tax revenue is projected at only ₹28.67 lakh crore—just ₹30,000 crore higher than this year’s estimate. Much of this revenue is expected to come from fuel taxes, underscoring the limits of extracting more from the general public.
To meet fiscal deficit targets dictated by institutions such as the World Bank and the IMF amid weak revenues, the government has once again chosen to cut welfare spending and depress living standards. A low fiscal deficit may appear commendable on paper, but in reality it signals stalled development and shrinking public investment.
Last year’s income tax concessions to the middle class were justified on the promise that increased savings would boost domestic demand, generate employment, and compensate for revenue losses. This year’s budget, however, is silent on outcomes, as those hopes have clearly failed. Domestic markets did not expand, industries did not grow, and investment did not rise. Instead, savings were spent on imported consumer goods. This raises a fundamental question: should public resources serve the 95 percent working population or the 5 percent wealthy elite?
Expanding the domestic economy requires higher minimum wages for informal workers, regular filling of vacancies, the abolition of exploitative contractual labour, remunerative prices for farmers based on the Swaminathan formula, and expanded employment with higher wages under MGNREGA. None of these measures find place in the budget because they conflict with corporate interests.
Government spokespersons summarise the budget by asserting that corporations will now drive development, create jobs, and deliver quality services, while the state limits itself to a guiding role focused on fiscal discipline. For ordinary people, this translates into withdrawal of the state and the opening of pathways for privatisation, disinvestment, and corporate plunder. After labour laws that weaken workers’ rights, agricultural laws will again be imposed on farmers. Welfare spending will be cut, corporate loans waived, and tax concessions expanded. The budget even announces the gradual elimination of food and fertiliser subsidies over the next five years. Dissenting voices will be silenced, while communal polarisation will be used to divide the people.
This budget makes it unmistakably clear that rural India is being sacrificed in the name of development. The opacity surrounding the VBG–Ram Ji scheme, inadequate funding for the MGNREGA transition, growing financial pressure on states, and systematic cuts in welfare spending all convey the same message: the interests of ordinary people are secondary. Development cannot be achieved by painting rosy pictures on paper. Funds must be spent, schemes must function, and people’s welfare must be prioritised. Until then, the dreams of the majority of Indians will remain unfulfilled.
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