Context:
The Union Budget 2026-27 shows limited increases in social sector spending, with reduced allocations and underspending in several welfare schemes. This indicates a shift of welfare responsibilities toward State governments amid fiscal consolidation.
Key Highlights:
Policy Trends in Social Sector Spending
• The Budget introduces no new flagship social sector schemes, continuing the trend of low priority for welfare expenditure.
• Several major social welfare programmes received only marginal increases.
Allocations for Key Welfare Schemes
• National Social Assistance Programme (NSAP)
• SAMARTHYA Scheme (women empowerment programmes)
• PALNA Scheme (child care services)
• PM POSHAN Scheme (mid-day meal programme)
• Saksham Anganwadi
- These schemes saw minimal nominal increases ranging from about 0.2% to 5.2%.
Underspending in Social Sector
• Revised Estimates (RE) for FY 2025-26 are lower than Budget Estimates (BE) for most schemes.
• This indicates underutilisation or delayed implementation of funds.
Decline in Centrally Sponsored Schemes (CSS) Spending
• Allocations for Centrally Sponsored Schemes declined sharply:
- ₹5,41,850 crore (BE 2025-26)
- ₹4,20,078 crore (RE 2025-26)
- This reflects reduced central commitment to welfare spending.
Health and Education Spending
• Budget increases are relatively modest:
- Health sector increase: ~6.4%
- Education sector increase: ~8.3%
- Actual spending remains below earlier budget projections.
Shift of Welfare Responsibility to States
• The Centre appears to be reducing financial commitments while States continue to implement welfare programmes.
• States now bear larger fiscal responsibility for social welfare.
Fiscal Context
• Although 41% tax devolution is recommended by the Finance Commission, the effective share of States in central tax revenue is about 34%.
• This occurs because cesses and surcharges are excluded from the divisible pool.
Finance Commission Grants
• Finance Commission transfers to States slightly declined:
- ₹1,32,767 crore (BE 2025-26)
- ₹1,29,397 crore (BE 2026-27)
Stakeholders Involved
• Union Government
• State Governments
• Vulnerable populations (elderly, women, children, poor households)
• Local governments implementing schemes
Relevant Prelims Points:
- Centrally Sponsored Schemes (CSS)
- Schemes funded partly by the Centre and partly by States.
- Implementation responsibility lies primarily with States.
- Examples include PM POSHAN, AMRUT, PMAY, MGNREGA, and NHM.
- Budget Estimates (BE)
- Projected expenditure or revenue for the upcoming financial year.
- Revised Estimates (RE)
- Mid-year revision of budget projections based on actual spending trends.
- National Social Assistance Programme (NSAP)
- Provides social pensions to vulnerable groups such as elderly, widows, and disabled persons.
- PM POSHAN Scheme
- Formerly known as the Mid-Day Meal Scheme.
- Provides nutritious meals to school children in government schools.
- Anganwadi System
- Implemented under the Integrated Child Development Services (ICDS) programme.
- Provides nutrition, early childhood care, and health services.
Relevant Mains Points:
- Implications for Social Justice
- Reduced central support may affect vulnerable populations dependent on welfare schemes.
- Inequalities may widen if poorer States lack resources to sustain welfare spending.
- Impact on Cooperative Federalism
- Fiscal devolution without adequate resources can strain Centre–State relations.
- States may face fiscal stress in maintaining social programmes.
- Fiscal Prioritisation Debate
- The government prioritizes capital expenditure (capex) to stimulate long-term growth.
- However, underinvestment in social sectors may undermine inclusive development.
- Distributional Impact of Fiscal Policy
- Reduced social spending may affect health, nutrition, education, and social protection outcomes.
- Development Strategy Concerns
- Balanced growth requires simultaneous investments in infrastructure and human development.
Way Forward
• Ensure adequate funding for social sector programmes to support vulnerable groups.
• Improve efficiency and monitoring of welfare spending.
• Strengthen fiscal capacity of States through greater tax devolution and predictable transfers.
• Balance growth-oriented capital spending with social protection priorities.
UPSC Relevance:
• Prelims: Centrally Sponsored Schemes, BE vs RE, welfare schemes.
• Mains: GS-II – Governance and welfare schemes; GS-III – Fiscal policy and inclusive growth.