As Budget renews push for social sectors, gap in implementation persists

Spending on health and education as percentage of GDP is modest and below policy targets

Union Budget 2026-27 promised expanded welfare support, alongside continued commitment to fiscal consolidation. Beyond headline-making announcements, the test lies in how effectively allocations are spent. Welfare expenditure is both a political signal and a fiscal tool — expanded in times of stress and tightened to meet deficit targets. An examination of scheme-level utilisation and broader sectoral trends suggests a complex story.

 

Several flagship schemes show sharp divergences between Budget estimates (BE) and revised estimates (RE) for FY26. While PM-Kisan, MGNREGA and PM Garib Kalyan Yojana used their funds completely, several infrastructure and urban development schemes trailed. PMAY-Urban 2.0 spent just 8.57 per cent of its allocated funds, the PM Internship Scheme 4.86 per cent, and the Urban Challenge Fund 10 per cent. Jal Jeevan Mission spent only 25.37 per cent of its allocation, and Swachh Bharat 40 per cent. PM-Ayushman Bharat, a health insurance scheme, utilised only 58.17 per cent of its funds. 

 

At the macro level, central government spending on health and education as a share of the gross domestic product (GDP) is modest. Combined expenditure peaked at 0.83 per cent of GDP in 2020-21 during the pandemic and has since declined to 0.61 per cent in 2024-25 and was 0.62 per cent in the 2026-27 BE.

 

Health expenditure is 0.27 per cent of GDP and education 0.35 per cent in 2026-27 BE. That is much less than the 2017 National Health Policy target of raising government spending in the sector to 2.5 per cent of GDP by 2025. Reaching the 2.5 per cent target would require an increase of 2.23 percentage points of GDP — implying the central government’s health allocations expand to ninefold and assuming GDP growth remains constant. 

 

The share of social services in total revenue expenditure reflects shifting fiscal priorities. From 4.23 per cent in 2014-15, the share steadily rose to 6.51 per cent in 2019-20, before peaking at 8.84 per cent in 2021-22 amid pandemic-led welfare expansion.

 

However, the ratio has since declined sharply to 4.95 per cent in 2024-25 (RE) and 4.31 per cent in 2025-26 (RE), before recovering marginally to 5.01 per cent in 2026-27 (BE). The post-pandemic rollback suggests a shift towards fiscal consolidation, with welfare expansion appearing more episodic than structural.