A highwire walk that must balance between economic growth and people’s welfare needs

Similarly, the budget takes cognisance of sluggish manufacturing sector growth — enhancement of credit guarantees to MSMEs, credit cards to micro-enterprises and the new National Manufacturing Mission seem sensible to boost supply. Even enhancements in tax exemption limits to spur private consumption were more than expected.

But budget numbers tell a slightly different story — one marked with mid-year contractions.

Take agriculture. Allocations for the ministry of agriculture and farmer welfare have declined by 3% compared to the revised estimates (RE) and are only 4% more than last year’s budget estimates (BE).

The situation is worse for the social sector. The year 2025 marks a significant milestone in India’s welfare history — the 20th anniversary of flagship social schemes such as the National Health Mission (NHM), Sarva Shiksha Abhiyan (SSA) (now subsumed under Samagra Shiksha), and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). These programmes were designed to universalise primary education and provide employment security to millions in rural India. Over the years, they have played a crucial role in reducing poverty and improving human development indicators.

Despite the rhetoric around strengthening welfare, mid-year cuts in social sector spending have become a recurrent feature. The ministry of tribal affairs, for example, saw 39% of its budget slashed in FY23-24 RE, despite policy commitments to expanding Eklavya Model Residential Schools (EMRS). The ministry of rural development, which oversees MGNREGA, National Social Assistance Programme (NSAP) and Pradhan Mantri Awas Yojana Grameen (PMAY-G), also saw stagnant allocations.

The situation is similar this year. Allocations for MGNREGS see no additions, even as the expenditure on the scheme with two months left in the financial year has exceeded budget estimates by ₹4,000 crore. Adding pending dues, the expenditure increases to ₹1.09 lakh crore. NSAP too has seen no change in its allocations since FY22-23.

Saksham Anganwadi and Poshan 2.0, the revamped scheme, saw a marginal nominal 4% increase — not even keeping with inflation. It is unclear how the inflation-indexed cost norms for providing food pending since 2017 will be realised given these modest allocations. While budgets for Samagra Shiksha increased 11%, till August last year, GoI had released only 17% of its allocations, suggesting that actual expenditure may be lower than the REs. Even the infrastructure-based entitlement schemes face a similar fate. While targets were to be met by 2024 for the Jal Jeevan Mission (for safe rural drinking water to all households) and PMAY-G (rural housing scheme), the slowdown in expenditure has seen the need for scheme extensions till FY28-29 with enhanced promised outlays. Yet, we have not been able to spend funds resulting in a significant mid-year correction across both these schemes. This year JJM allocations fell 5% compared to last year’s BEs, while PMAY-G increased only 1%. Similarly, the ministry of housing and urban affairs (MoHUA) faced a 23% reduction, delaying key projects under PM Awas Yojana-Urban (PMAY-U).

The fundamental question is why do these cuts persist? The departmental-related standing committees across ministries have flagged delays in fund utilisation at the state level — driven by rigid financial release conditions. Under the new Single Nodal Account (SNA) system, ministries are often required to exhaust 75% of previous grants before receiving fresh disbursements, leading to a situation where under-utilisation in one-year results in lower allocations in the next. The system is designed to increase efficiency and improve financial oversight. But in practice, it has often prioritised control over efficiency, delaying essential funds and undermining welfare programmes. Take MGNREGS, where the Aadhaar-Based Payment System (ABPS), implemented for wage payments, has introduced new layers of exclusion and delays. A recent study of 31.36 million wage transactions across 10 states found no statistically significant improvement in timely payments under ABPS. Instead, the system has made rectifying payment failures more complex, further delaying wages for workers.

From the start, the government of India’s approach to post-pandemic recovery has been largely state-led, ramping up capex at an average annual growth rate of 30% between FY20-24. As a proportion of GDP, capital spending nearly doubled from 1.7% in FY20 to 3.2% in FY24. However, this trajectory now appears increasingly unsustainable — not just because of fiscal constraints, but also because of inefficiencies in implementation.

With a ₹92,682 crore shortfall in the government’s FY 24-25 capex target of ₹11.1 trillion and an eight-month lull in capex spending till November, the cracks in this approach are becoming evident. The premise of infrastructure-driven growth rests on two assumptions — that public investment will crowd in private investment, and that infrastructure expansion will drive long-term economic mobility and welfare. However, neither assumption fully holds if the execution of capital spending is inconsistent, and states struggle to utilise allocated funds.

Avani Kapur is founder and director, Foundation for Responsive Governance and senior visiting fellow at the Centre for Policy Research. The views expressed are personal