India’s Next Union Budget: Moving Beyond Relief to Jobs and Human Capital

India’s economy stands at a juncture where merely announcing a growth rate is no longer sufficient. The real question is not how much GDP has grown, but how many jobs that growth has created, how stable incomes have become in agriculture and small industries, and how much real improvement ordinary citizens have experienced in essential services such as education and healthcare. In this context, the forthcoming Union Budget must be more than an accounting exercise; it must be a document that decisively sets the direction of the economy.

In the current financial year, the Union government’s total expenditure has steadily increased. Yet a large share of this spending still goes toward subsidies, transfers, and short-term relief. Allocations to agriculture, rural development, education, and health appear sizeable, but the key question remains: is this spending translating into productivity gains, sustainable employment, and stronger human capital? The next budget will be judged on this very yardstick.

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Agriculture: From Income Support to Productivity and Water Security

This year, expenditure on agriculture and farmer welfare exceeds ₹1 lakh crore, a significant portion of which is directed toward direct income support and interest subsidies. While these measures provide immediate relief, the structural problems of agriculture—low productivity, water stress, and market risk—remain largely unaddressed.

The next budget must treat agriculture not merely as a welfare sector, but as a productive industry. Micro-irrigation, water conservation, drip and sprinkler technologies, and post-harvest management—such as cold storage, processing, and market linkages—should be central priorities. Farmers’ incomes will stabilize only when they are integrated into the value chain, rather than being confined to crop production alone.

Department of Agriculture & Farmers’ Welfare (DA&FW), BE 2025–26: ₹1,27,290.16 crore

According to PRS, the bulk of this allocation is concentrated in three heads: PM-KISAN, interest subvention, and crop insurance.

Policy signal: The agricultural budget must integrate productivity, risk management, and value chains into a single framework.

Key reform directions include restructuring crop insurance into a climate-risk management tool with better data, faster assessments, and transparent claim settlement; prioritizing efficient water use under a “more crop per drop” approach; strengthening post-harvest value chains through cold storage, grading, processing, and farmer entrepreneurship; and improving the quality of agricultural credit by linking it to productive investments such as irrigation, machinery, and storage.

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Employment: From Relief to Sustainable Work

The Ministry of Rural Development is among the largest recipients of budgetary allocations. However, rural employment schemes are often criticized for providing work without creating durable assets. Employment policy must now be reimagined at three levels—rural, urban, and modern (including gig and technology-based work).

In rural areas, employment should be tied to the creation of productive assets such as water infrastructure, roads, storage facilities, and soil conservation works. Urban employment requires apprenticeship programs, partnerships with municipal bodies, and collaboration with private industry. Most importantly, social security for informal and gig workers—health coverage, accident insurance, and portable benefits—has become an economic necessity rather than a policy option.

Ministry of Labour & Employment, BE 2025–26: ₹32,646.19 crore

The focus must be on asset-building in rural employment, skill-linked urban jobs and apprenticeships, and rapid formalization combined with social security for informal and gig workers.

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Industry and MSMEs: From Credit to Markets

Despite being the largest source of employment, the MSME sector receives relatively modest budgetary support. Policy has so far emphasized access to cheap credit, but without assured markets and timely payments, credit alone can become a burden.

The next budget must firmly link MSMEs to government and public sector procurement, enforce strict payment discipline, and prioritize technology upgrades. With access to modern machinery, energy-efficient processes, and cluster-based facilities, MSMEs can become the most powerful engine of job creation.

Ministry of MSME, BE 2025–26: ₹23,168.15 crore

The shift must be from a credit-driven to a market-driven MSME strategy, supported by technology upgrades, energy efficiency, and reduced logistics costs through integrated transport and warehousing solutions.

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Services: India’s Real Job Machine

The services sector is the largest contributor to India’s economy, yet it often receives secondary attention in policy design. Tourism, healthcare, education, retail, logistics, and IT-enabled services offer high employment potential with relatively low capital investment.

The next budget should place Tier-2 and Tier-3 cities at the center of services-led job creation. By combining digital public infrastructure, skill training, and local entrepreneurship, services can become the backbone of employment expansion.

Priority areas include tourism infrastructure and safety, extending digital platforms to small businesses, and developing service hubs—such as BPOs and digital support centers—in smaller cities.

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Health: Beyond Hospitals to Public Health

Health expenditure stands at nearly ₹1 lakh crore this year. The post-pandemic experience has made it clear that hospitals and insurance alone are insufficient. Primary healthcare, prevention, and human resources are now decisive pillars.

The next budget must address shortages of doctors, nurses, and paramedical staff, create incentives for rural postings, and strengthen public health surveillance. Healthy citizens are productive citizens—a reality now firmly acknowledged by economic thinking.

Ministry of Health & Family Welfare, BE 2025–26: ₹99,859 crore

National Health Mission alone accounts for a large share of this allocation.

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Education: From Degrees to Capability

Spending on education is substantial, yet learning outcomes remain weak. At the school level, foundational literacy and numeracy are in crisis, while higher education remains distant from industry needs.

The next budget must link education with employment through stronger foundational learning, teacher training, research funding, and skill integration. If education fails to build capability, India’s demographic dividend risks turning into a demographic burden.

Ministry of Education, BE 2025–26: ₹1,28,650 crore

The focus must simultaneously be on improving learning outcomes and employability—through foundational education, research and innovation funding, and closer integration of skills, internships, and industry partnerships.

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Water and Drinking Water: A Cross-Cutting Priority

Ministry of Jal Shakti, BE 2025–26: ₹99,502.85 crore

Water policy intersects with agriculture, health, and urban services. Integrated planning and outcome-linked funding across these sectors is essential.

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Giving Direction to the Budget

If the 2026–27 budget succeeds in three areas simultaneously—enhancing agricultural productivity and water security, expanding employment through MSMEs and services, and building strong systems in education and health—it can address India’s most pressing challenge: quality employment combined with robust human capital.

If the next budget merely increases expenditure, it will miss a historic opportunity. But if it aligns productivity in agriculture, job creation in industry and services, and human capital formation in education and health, it will shape India’s economic trajectory for the coming decade. Today’s challenge is not a lack of resources, but a question of priorities—and the next budget will be remembered by how clearly it sets them.