By CA Anil K. Jain  (Mail: CAINDIA@HOTMAIL.COM)
Chartered Accountant | Macro-Economist | Policy Researcher | Author

Executive Summary

India’s annual Union Budget is one of the most consequential exercises in national economic governance. It determines how public resources are mobilised, how expenditure is distributed among competing priorities, how the fiscal deficit is managed and how the government intends to influence economic activity during the coming financial year.

Yet a fundamental question deserves serious consideration: Are India’s annual budgets consistently designed to maximise sustainable economic growth, or have they become exercises in announcing allocations, introducing schemes and managing fiscal aggregates without sufficiently measuring their long-term economic returns?

India has made considerable progress in infrastructure development, digital public infrastructure, tax administration, financial inclusion, renewable energy and social welfare. Public capital expenditure has also become a more prominent component of the Union Budget. These achievements should be acknowledged. Nevertheless, significant structural challenges persist, including inadequate employment generation, uneven productivity, agricultural distress, deficiencies in education and healthcare, regional disparities, weak research and development, and insufficient participation of labour-intensive manufacturing in the growth process.

The central problem is not that every Indian Budget lacks growth-oriented measures. Rather, the budgetary system does not consistently demonstrate that the money allocated has produced the expected economic and social outcomes. Announcements frequently receive greater public attention than project completion, implementation quality, employment created, private investment mobilised and the long-term returns generated by expenditure.

India therefore needs a shift from an allocation-oriented budget to an outcome-oriented development budget. This requires credible economic assumptions, realistic revenue projections, rigorous project appraisal, stronger implementation monitoring, more productive expenditure, improved coordination with state governments and a transparent assessment of results.

Experiences from Indonesia, Vietnam and Rwanda demonstrate useful lessons about public expenditure management, infrastructure planning, institutional coordination and accountability. Their experiences also show that allocating money is insufficient: the quality of institutions and the efficiency with which resources are converted into productive assets are equally important.

The next Union Budget should consequently be judged by a simple standard: will it materially improve India’s productive capacity, create dignified employment, raise household incomes, strengthen human capital and make economic growth more broad-based while maintaining fiscal sustainability?

1. Introduction:  Budget Must Be an Instrument of National  Development

Every year, the Union Finance Minister presents the government’s financial proposals before Parliament. The Budget estimates revenue, proposes taxation measures, allocates expenditure among ministries and programmes, and establishes fiscal targets for the financial year beginning on 1 April.

Under Article 112 of the Constitution, the Annual Financial Statement presents the government’s estimated receipts and expenditure. The wider budget framework also includes demands for grants, fiscal policy statements and documents concerning the implementation of previous announcements. These mechanisms provide an institutional foundation for financial planning and legislative oversight. However, the real purpose of a national budget must extend beyond satisfying constitutional requirements and balancing competing claims on the public exchequer.

A development-oriented budget should help answer five essential questions:

1. How much additional productive capacity will the proposed expenditure create?
2. How many sustainable jobs will be generated, directly and indirectly?
3. How will the budget improve productivity, competitiveness and private investment?
4. What measurable improvements will citizens experience in education, healthcare, water security, transport and other public services?
5. How will the government verify that the intended results have actually been achieved?

If these questions are not addressed systematically, a budget may appear impressive in terms of its size and announcements while delivering disappointing results relative to the resources committed.

The challenge before India is therefore not merely to spend more, but to spend better, implement faster and measure outcomes more rigorously.

2. The Principal Deficiencies in India’s Budgetary System

2.1 Excessive emphasis on annual allocations rather than economic outcomes

One of the principal weaknesses of traditional budgeting is its emphasis on how much money a ministry or scheme receives rather than what that money ultimately accomplishes. An increase in the allocation for education, healthcare, rural development, infrastructure or industrial promotion is often presented as evidence of progress. But an increase in expenditure does not automatically produce a corresponding improvement in quality or outcomes.

For example, a higher education allocation is not, by itself, proof that learning standards have improved. The relevant indicators include literacy and numeracy, teacher availability, school attendance, completion rates, vocational skills and the employability of graduates. Similarly, an increase in healthcare expenditure should be assessed against improvements in primary healthcare access, preventive care, maternal and child health, affordability and the availability of qualified medical personnel.

Infrastructure allocations must be evaluated according to completed and operational projects, reductions in logistics costs, travel-time savings, reliability of services and the economic activity they facilitate. India needs a systematic shift from measuring the inputs of government expenditure to measuring its outcomes.

2.2 Incremental budgeting and inadequate review of existing schemes

Government departments frequently seek higher allocations for existing programmes, partly because expenditure in the preceding year becomes the starting point for the following year’s negotiations. This incremental approach can perpetuate programmes whose original objectives have changed, whose implementation has become inefficient or whose results no longer justify their costs.

The result may be the accumulation of overlapping schemes, administrative expenditure and subsidies without sufficiently rigorous evaluation of their relative benefits. Before approving additional funds, the Finance Ministry should require ministries to demonstrate what existing allocations have achieved. Schemes with strong evidence of success should be expanded, those requiring improvement should be redesigned, and persistently ineffective interventions should be discontinued or merged.

This does not mean eliminating programmes merely because they are difficult to evaluate. It means establishing a disciplined process through which public expenditure is periodically justified on the basis of need, effectiveness and opportunity cost.

2.3 Unrealistic revenue projections and weak forecasting discipline

A credible budget depends on realistic estimates of tax revenue, non-tax revenue, economic growth, inflation, interest rates and expenditure commitments. Overly optimistic assumptions can create an illusion of fiscal space. If receipts subsequently fall short, the government may be compelled to reduce expenditure, postpone payments, defer projects or borrow more than anticipated.

Conversely, excessively conservative projections can lead to an unnecessarily restrictive allocation of resources. Tax revenues depend on several variables, including nominal GDP growth, corporate profitability, household consumption, imports, compliance and changes in tax policy. These relationships must be assessed carefully rather than assuming that collections will automatically rise at a predetermined rate.

The Finance Ministry should publish the principal assumptions underlying its estimates, explain significant deviations from earlier forecasts and disclose the implications of alternative economic scenarios. Forecast accuracy should become an explicit measure of the quality of budget preparation.

2.4 Insufficient integration of annual budgets with long-term development planning

Many economically important projects require several years to complete. Industrial corridors, freight infrastructure, irrigation systems, urban transport, power transmission, research facilities and water-replenishment projects cannot be planned effectively through isolated annual decisions.

A project may receive an initial allocation but subsequently face delays because land acquisition, environmental approvals, utility relocation, financing, procurement or complementary infrastructure has not been completed. The next annual budget then inherits unfinished commitments, while the expected economic benefits remain unrealised.

India needs stronger links between annual appropriations, medium-term expenditure frameworks and long-term sectoral strategies. Each major project should have a realistic completion schedule, a financing plan covering its entire lifecycle and clearly identified responsibilities for implementation. The budget should distinguish between new projects ready for execution and proposals that have not yet completed the necessary preparatory work.

2.5 Weaknesses in project appraisal and post-completion evaluation

Public investment is growth-enhancing only when it produces useful assets at a reasonable cost. A road, railway line, irrigation facility or industrial park may create substantial economic value. However, the benefits can be undermined by inappropriate location, inflated costs, inadequate demand assessment, poor construction quality or the absence of connecting infrastructure. Before approval, major projects should undergo independent appraisal covering:

• Economic and social cost-benefit analysis.
• Expected employment and productivity effects.
• Land, environmental and rehabilitation requirements.
• Construction and financing risks.
• Future maintenance and operating costs.
• Sensitivity to lower demand, higher costs and implementation delays.

After completion, the government should compare actual outcomes with the original appraisal.If a project was expected to reduce transport costs, the evaluation should measure whether it did so. If an industrial park was intended to attract manufacturing, the government should report operational units, private investment, employment and exports rather than only the amount spent on developing the site. Such evaluations would improve the quality of future investment decisions and reduce the repetition of avoidable mistakes.

2.6 The gap between budget announcements and implementation

India’s budget documents already recognise implementation as an important responsibility. The Department of Economic Affairs publishes a statement on the implementation of announcements made in the previous Finance Minister’s Budget speech. The existence of such a mechanism is useful, but the quality of accountability depends on what is measured and how independently the information is verified.

An announcement marked as completed may indicate that a notification was issued or an administrative decision was taken. It does not necessarily establish that the intended economic benefit has reached citizens or businesses. Consider an announced industrial incentive. Its success should not be judged solely by the publication of guidelines. The assessment should establish how much additional investment was generated, how many projects became operational, what employment was created and whether the investment would have occurred even without the incentive.

The government should publish a consolidated dashboard covering major announcements, actual expenditure, implementation milestones, project completion, beneficiary outcomes and reasons for delays. A distinction must be maintained between an announcement completed administratively and an objective achieved economically.

2.7 Revenue expenditure, subsidies and the quality of public spending

Not all revenue expenditure is unproductive. Spending on teachers, doctors, nutrition, research personnel, preventive healthcare and essential public services can generate substantial long-term economic returns. Likewise, some subsidies are justified on grounds of poverty reduction, food security, environmental protection or correcting market failures.

The real deficiency arises when expenditure is continued without adequate targeting, periodic review or assessment of its developmental contribution. Poorly designed subsidies can distort incentives, encourage excessive consumption of scarce resources, crowd out more productive spending and impose recurring fiscal obligations.

For example, electricity subsidies that are inadequately targeted can weaken the finances of power distribution companies and discourage efficient energy use. Agricultural support that is poorly structured may encourage cultivation patterns inconsistent with local water availability. The solution is not indiscriminate subsidy reduction. It is better targeting, transparent costing, periodic evaluation and gradual reform accompanied by protection for vulnerable households.

2.8 High interest payments and limited fiscal flexibility

Interest payments absorb resources that could otherwise finance new public services and development priorities. The Parliamentary Research Service PRS, in its analysis of the Union Budget for 2026–27, reported that interest payments were estimated at approximately 26% of total expenditure and 40% of revenue receipts. These figures illustrate the importance of managing debt and improving the quality of spending.

Debt is not inherently undesirable. Borrowing to finance economically sound infrastructure can be justified when the long-term social and economic returns exceed the cost of financing. The concern arises when borrowing supports recurring expenditure without generating corresponding productive capacity, or when projects fail to produce the anticipated returns. Fiscal consolidation should therefore be designed to protect productive investment while controlling wasteful expenditure and keeping debt on a sustainable path.

2.9 Inadequate attention to employment-intensive growth

Economic growth does not automatically generate sufficient employment for a large and young workforce. Capital-intensive industries can raise output significantly without creating jobs in proportion to their investment. Meanwhile, smaller businesses often face difficulties relating to credit, compliance, technology adoption, market access and delayed payments. The Budget should give greater attention to sectors capable of combining productivity improvements with large-scale employment, including labour-intensive manufacturing, food processing, tourism, logistics, construction, textiles, electronics supply chains and selected business services.

Support should be linked to additional investment, formal employment, skill development, productivity and export competitiveness wherever appropriate. Employment generation should be measured explicitly rather than treated as an assumed consequence of every growth-oriented announcement.

2.10 Insufficient attention to human capital and regional disparities

India’s economic potential depends heavily on the quality of its workforce. Weak foundational learning, inadequate vocational training, gaps in healthcare and nutrition, and limited access to quality higher education can prevent people from participating fully in economic growth. The problem is particularly important in states and districts where private investment, industrial infrastructure and skilled employment remain limited. The Union Budget should use transparent indicators to identify areas requiring additional support, while respecting the constitutional division of responsibilities between the Union and state governments.

Fiscal transfers should be designed to improve service delivery, strengthen local implementation capacity and reduce regional inequalities without weakening incentives for efficient governance.

2.11 Insufficient public scrutiny of fiscal risks

A budget is necessarily based on estimates. Economic growth, commodity prices, global trade, interest rates, exchange rates and tax collections can all change unexpectedly. However, uncertainty should not be concealed behind a single set of projections. The government should disclose major fiscal risks, including contingent liabilities, guarantees, public-sector obligations, potential subsidy pressures and the exposure of infrastructure projects to cost overruns.

A credible budget should explain how the government would respond if growth or revenue fell below expectations, while identifying which essential and productive expenditures would be protected. Such transparency would strengthen Parliament’s oversight role and improve the confidence of investors and citizens.

3. Examples Illustrating the Difference Between Allocation and Growth

Example 1: Roads and infrastructure

Suppose the government allocates substantial funds for road construction. The allocation is an important first step, but the economic benefit depends on whether projects are completed on time, connect productive centres, reduce transport costs and support trade. A road that remains incomplete or lacks connecting infrastructure may produce limited benefits despite substantial expenditure. The appropriate indicators are not merely kilometres sanctioned or funds released. They include kilometres operational, logistics costs, travel-time reductions, safety, maintenance quality and the economic activity facilitated.

Example 2: Manufacturing incentives

A production-linked incentive or similar programme may attract investment in a strategic industry. However, the gross investment reported under the scheme should not automatically be treated as investment caused by the scheme. Evaluation should consider additional investment, domestic value addition, technology transfer, export performance, employment, fiscal cost and the possibility that investment would have occurred without public support. Incentives should be reviewed periodically and redesigned when their additional economic benefits do not justify their fiscal cost.

Example 3: Agricultural expenditure

Agriculture employs a substantial proportion of India’s workforce, while its contribution to national output is considerably smaller. This reflects a productivity and income challenge, although agriculture also performs important food-security and ecological functions. Simply increasing allocations for agricultural support will not resolve the problem unless expenditure improves irrigation efficiency, water security, storage, food processing, agricultural research, market access, crop diversification and farmers’ bargaining power. Investment in these areas can improve farm incomes while creating employment beyond cultivation itself.

Example 4: Education and skill development

A large training budget may produce impressive enrolment figures. Yet the programme’s true value depends on whether trainees acquire marketable skills and obtain suitable employment.Publicly funded training should therefore be assessed through independent tests of competency, employer feedback, placement quality, earnings progression and employment retention. These examples demonstrate a common principle: the success of a budgetary measure must be established through measurable additional benefits, not inferred from the amount of money allocated.

4. Lessons from Other Developing Economies

There is no single foreign budgetary model that India should copy. Each country operates within its own political, institutional, demographic and economic circumstances. Nevertheless, several developing economies offer useful lessons about improving the relationship between public expenditure and economic development.

4.1 Indonesia: Improve spending quality and domestic revenue mobilisation

Indonesia offers a useful example of sustained efforts to strengthen macroeconomic stability and public financial management while addressing major infrastructure and human-capital requirements. The World Bank’s Indonesia Public Expenditure Review: Spending for Better Results examined how public resources could be used more effectively across infrastructure, education, health and other development priorities. The review highlighted the importance of increasing domestic revenue mobilisation, improving expenditure efficiency, strengthening data systems and evaluating the results of public spending. It also identified continuing infrastructure and human-capital gaps, demonstrating that progress in fiscal management does not automatically resolve every development challenge.

Lesson for India: The Finance Ministry should evaluate expenditure across sectors as a connected portfolio. Tax mobilisation, infrastructure development, education, healthcare and social protection must reinforce one another. Budget allocations should be accompanied by reliable data on service delivery and development outcomes. India can also strengthen the assessment of transfers to states and local institutions, ensuring that available funds translate into better public services and reduced regional inequalities.

4.2 Vietnam: Infrastructure spending must be efficient, not merely large

Vietnam’s experience is particularly relevant to India’s ambitions in manufacturing, exports and infrastructure-led development. The World Bank’s August 2023 Taking Stock report identified significant weaknesses in the efficiency of Vietnam’s public investment. It reported that only about 77% of investment allocations were spent during 2017–2022, with project delays, cost overruns and inadequate maintenance undermining the returns on public expenditure. These findings offer an important caution: even a country pursuing an investment-led development strategy can lose substantial economic value when project preparation, execution and asset management are weak. Vietnam’s wider experience in export-oriented manufacturing and integration into international supply chains is also instructive, although its results reflect multiple factors, including trade policy, investment, labour markets and global economic conditions.

Lesson for India: Infrastructure allocations should be supported by project readiness, reliable procurement, realistic schedules and effective coordination between government departments. Completed assets must be maintained, and the economic returns on public investment must be evaluated after implementation. The government should avoid treating the mere expansion of capital expenditure as sufficient evidence of success.

4.3 Rwanda: Strong planning and coordination, with continuing institutional challenges

Rwanda provides a useful example of a developing economy that has strengthened aspects of public investment planning and coordination. An International Monetary Fund Public Investment Management Assessment published in 2023 found that Rwanda performed relatively well, compared with other sub-Saharan African countries and some emerging-market economies, in national and sectoral planning, coordination across government and procurement. The same assessment identified weaknesses in areas including multi-year budgeting, investment allocation, project appraisal, portfolio management and public-asset monitoring. This balanced assessment is important. Good planning institutions can improve the quality of development expenditure, but institutional design must be translated into consistent implementation.

Lesson for India: National priorities, departmental plans, state-level implementation and annual financial allocations should be better integrated. Every major project should have a clearly identified implementing authority, measurable milestones and a process for addressing delays. India should also strengthen the monitoring of assets after construction so that roads, irrigation systems, public buildings and other infrastructure continue to deliver benefits over their useful lives.

4.4 The broader lesson: Borrow institutional practices, not slogans

The experiences of Indonesia, Vietnam and Rwanda do not establish that their entire budgetary systems are superior to India’s. Each faces its own fiscal, administrative and developmental constraints. Their practical value lies in specific lessons: Indonesia demonstrates the importance of spending quality and better data; Vietnam illustrates the costs of weak investment execution; and Rwanda highlights the value of coordinated planning alongside the need to improve implementation effectiveness.

India has the advantage of a large domestic market, a substantial skilled workforce, established financial institutions and extensive digital public infrastructure. The opportunity is to combine these strengths with stronger expenditure management, rigorous evaluation and greater accountability. International experience should inform reform, but India’s own constitutional structure, federal arrangements and development priorities must determine the final design.

5. What Should the Finance Minister Do Differently in the Next Union Budget?

The next Union Budget, for 2027–28, should be prepared against the background of multiple challenges: global economic uncertainty, changing trade relationships, technological disruption, employment pressures, climate risks, infrastructure requirements and the need to maintain fiscal discipline. The following reforms deserve serious consideration.

5.1 Establish a National Growth and Productivity Framework

The Finance Ministry should publish a medium-term growth framework explaining how fiscal policy will contribute to higher productivity, investment, employment and household incomes over the following three to five years. This framework should identify measurable priorities for manufacturing, agriculture, services, infrastructure, education, healthcare, innovation and exports. Each major budgetary initiative should specify its intended economic contribution, implementation timetable, expected beneficiaries and measurable results.

For example, a programme intended to promote manufacturing should specify its objectives for domestic value addition, productivity, exports, private investment and employment. A programme designed to improve irrigation should establish targets for water-use efficiency, agricultural productivity and farm incomes. The framework should be reviewed annually so that the Budget remains responsive to changing economic circumstances without abandoning long-term priorities.

5.2 Introduce Comprehensive Outcome-Based Budgeting

The Finance Ministry should progressively establish a unified outcome-based framework covering all major ministries and development programmes. Every substantial allocation should be accompanied by a limited number of clearly defined performance indicators.

The framework should distinguish among four stages:

• Financial inputs: How much money has been allocated and spent?
• Physical outputs: What infrastructure, services or facilities have been delivered?
• Economic outcomes: What improvements have occurred in productivity, employment, incomes or service quality?
• Long-term impact: Has the programme contributed to sustainable development and improved living standards?

This approach would help Parliament and the public understand the difference between expenditure incurred and economic value created. Independent evaluation should be required for major programmes, particularly those involving substantial public expenditure or recurring fiscal commitments.

5.3 Prioritise Productive Capital Expenditure without Neglecting Human Capital

Capital expenditure can stimulate economic activity during implementation and expand productive capacity over time. Roads, railways, logistics networks, power systems, irrigation facilities and urban infrastructure can reduce business costs and attract private investment. The Union Budget for 2026–27 provides a useful current benchmark. The government budgeted ₹12.22 lakh crore in capital expenditure and estimated effective capital expenditure, including grants for creating capital assets, at ₹17.15 lakh crore. These figures demonstrate the importance already attached to public investment. They also underline why the next stage of reform should focus on project quality, completion and economic returns, rather than expenditure growth alone. The next Budget should prioritise projects with strong economic justification, high social returns and credible implementation plans.

However, capital expenditure must not become an excuse to neglect human capital. A well-designed development strategy must also finance foundational education, preventive healthcare, nutrition, vocational training, agricultural research and scientific innovation. The appropriate balance is not between infrastructure and people. It is between different forms of investment that jointly strengthen national productivity.

5.4 Make Employment Generation a Central Budgetary Objective

India needs a more explicit framework for assessing the employment consequences of fiscal policy. The government should identify sectors that can create large numbers of sustainable jobs while improving productivity and competitiveness. These include textiles, apparel, footwear, food processing, tourism, logistics, electronics assembly, construction, healthcare services, selected professional services and other labour-intensive industries.

Budgetary support should focus on removing practical barriers to expansion, including inadequate infrastructure, high logistics costs, limited access to credit, skill mismatches and regulatory complexity. For micro, small and medium enterprises, faster payment of government dues, simpler compliance, improved access to formal credit and support for technological upgrading may be more effective than announcing numerous small subsidy schemes. Employment incentives should be evaluated against additional formal jobs created, wages paid, job retention and the fiscal cost per additional job.

Where feasible, the government should also assess whether subsidised employment represents genuinely additional hiring rather than the replacement of workers who would otherwise have been employed.

5.5 Strengthen Agriculture Through Productivity and Value Addition

Agricultural reform must be treated as a growth strategy, a rural-income strategy and a water-security strategy. The Budget should give priority to irrigation efficiency, watershed development, groundwater replenishment, agricultural research, storage, cold chains, food processing and market connectivity. India loses economic value when agricultural produce is wasted, farmers lack access to remunerative markets or scarce water resources are used inefficiently.

Public investment should support region-specific solutions based on soil conditions, rainfall, groundwater availability, cropping patterns and market demand. The government should also encourage agro-processing enterprises near production centres. Such enterprises can generate non-farm employment, reduce post-harvest losses and increase the value retained by rural communities.

Water infrastructure deserves particular attention. Investments in river-water recharge, aquifer management, rainwater harvesting and scientifically evaluated groundwater-replenishment technologies should be considered where feasibility studies establish their hydrological, environmental and economic value. The objective must be to combine higher agricultural productivity with the sustainable management of natural resources.

5.6 Improve the Tax System While Broadening the Productive Base

Tax policy should provide adequate revenue for public investment without creating unnecessary uncertainty for businesses and investors. Frequent changes, complicated compliance requirements and ambiguous provisions can raise administrative costs and discourage investment. The next Budget should prioritise greater predictability, simpler procedures, faster dispute resolution and consistent interpretation of tax laws.

The government should strengthen voluntary compliance by improving data integration, risk-based scrutiny and taxpayer services while protecting due process and taxpayer rights. It should also examine the effectiveness of tax concessions and exemptions. Any concession that does not generate sufficient additional investment, employment, innovation or other public benefits should be reconsidered.

Broadening the tax base through economic formalisation, higher productivity and improved compliance is generally more sustainable than repeatedly increasing the burden on a narrow group of compliant taxpayers.

5.7 Mobilise Private Investment through Better Policy Design

Public expenditure alone cannot finance all of India’s infrastructure, industrial and technological requirements. The Budget should establish a predictable environment for private investment by addressing regulatory uncertainty, infrastructure bottlenecks, contract enforcement, delayed approvals and financing constraints. Public-private partnerships can be useful where risks are allocated appropriately and projects generate reliable economic or user-fee revenues. However, such partnerships should not be treated as a way to conceal public liabilities or transfer excessive risk to the government.

Every major partnership should undergo transparent appraisal of its fiscal implications, contractual obligations, demand assumptions and value for money. Public funds should be used strategically to remove genuine bottlenecks, support essential infrastructure and attract additional private investment rather than subsidising investments that would have proceeded without government assistance.

5.8 Reform Subsidies and Welfare Delivery Without Abandoning Social Protection

A growth-oriented budget must remain inclusive. Food security, essential healthcare, social protection and support for vulnerable households can prevent deprivation and help people participate more effectively in the economy. The Finance Ministry should therefore avoid indiscriminate cuts to welfare expenditure. Instead, it should evaluate whether benefits reach intended recipients, whether administrative costs are reasonable and whether alternative programme designs can achieve the same objectives more effectively.

Digital systems can improve targeting and reduce certain forms of leakage, but beneficiary databases and technology-based delivery must be supported by accessible grievance mechanisms and safeguards for people who face digital or administrative barriers. Savings from better-designed programmes should be redirected towards high-value development priorities wherever appropriate.

5.9 Improve Fiscal Discipline Through Better Expenditure Management

Fiscal discipline is essential because excessive borrowing can raise future interest obligations and reduce the government’s capacity to respond to economic shocks. The government should continue to pursue a credible medium-term fiscal strategy while protecting expenditure that expands productive capacity. The first priority should be to improve the quality of existing spending, review poorly justified concessions, control avoidable administrative costs and strengthen project execution.

A transparent medium-term fiscal framework should include realistic revenue estimates, debt projections, interest-payment forecasts and sensitivity analysis under alternative growth and inflation scenarios. The Finance Ministry should also monitor contingent liabilities and ensure that public-sector entities, guarantees and public-private partnerships do not create hidden fiscal risks. Fiscal consolidation should be assessed not merely by the reduction in the deficit, but by whether the government’s debt position becomes more sustainable without damaging long-term growth.

5.10 Establish Independent Evaluation and Public Accountability

A major reform would be to strengthen independent evaluation of important government programmes. An appropriate institutional arrangement could involve the Comptroller and Auditor General, parliamentary committees, specialist evaluation bodies, academic institutions and independent economists, operating within their respective mandates. The objective should be to assess whether public expenditure has achieved its stated purpose and whether the benefits justify the cost.

For major programmes, evaluation reports should disclose:

• Original objectives and approved expenditure.
• Actual expenditure and implementation timelines.
• Physical outputs and measurable economic outcomes.
• Deviations from the original cost and schedule.
• Reasons for underperformance.
• Corrective actions and lessons for future budgets.

Parliament should receive a consolidated annual report comparing major commitments with verified results. This would strengthen democratic accountability and encourage ministries to treat implementation as a core responsibility rather than an administrative task following the Budget speech.

5.11 Strengthen Coordination between the Union and State Governments

Many critical development responsibilities, including health, agriculture, local infrastructure and public service delivery, depend substantially on state governments and local institutions. The Union Budget should therefore be coordinated with state-level development plans and implementation capacities. Transfers and centrally sponsored programmes should be designed with clear objectives, reasonable reporting requirements and flexibility to address legitimate regional differences.

The government should also improve the predictability of fund releases so that states can plan projects without unnecessary disruption. Performance-based incentives can be useful, provided that indicators account for differences in starting conditions and do not penalise poorer states simply because they have weaker initial administrative capacity. A cooperative federal approach can help ensure that national development priorities are translated into practical results on the ground.

5.12 Prepare for Artificial Intelligence, Climate Change and Global Economic Risks

The next Budget must recognise that India’s future growth will depend partly on its ability to adapt to technological and environmental change. Artificial intelligence can improve productivity in manufacturing, agriculture, healthcare, finance and public administration. It can also disrupt occupations and increase demand for new skills. Public investment should support research, digital infrastructure, secure data systems, AI skills and the responsible adoption of technology by smaller businesses. Similarly, climate-related risks can affect agricultural productivity, water availability, electricity demand, public health and infrastructure resilience.

The Budget should incorporate climate-risk assessments into major public investment decisions and encourage economically viable investments in renewable energy, energy efficiency, resilient infrastructure and water conservation. Global trade uncertainty also requires attention. India should diversify export markets, strengthen domestic supply chains where economically justified, improve product quality and help businesses meet international standards. These priorities should be integrated into the overall growth strategy rather than treated as isolated announcements.

6. Precautions the Finance Minister Should Take Before Finalising the Next Budget

Before presenting the Union Budget for 2027–28, the Finance Minister should insist on a rigorous internal review covering the following matters.

First, validate the economic assumptions. Revenue, inflation, nominal GDP, interest rates and expenditure projections should be based on transparent evidence and realistic scenarios.

Second, examine previous budget performance. Major allocations should be compared with actual expenditure, completed projects and verified outcomes. Persistent underutilisation should trigger investigation rather than automatic increases.

Third, protect fiscal credibility. The government should not promise expenditure that cannot be financed sustainably or assume revenues that depend on uncertain economic conditions.

Fourth, appraise major projects independently. Projects should be assessed for economic returns, readiness, environmental implications, implementation risks and lifetime maintenance costs before receiving substantial allocations.

Fifth, avoid excessive fragmentation. Numerous small schemes can increase administrative complexity and dilute resources. Consolidating overlapping programmes may improve effectiveness.

Sixth, consult stakeholders systematically. State governments, industry associations, MSMEs, agricultural organisations, economists, researchers, labour representatives and civil society should be consulted through a transparent process.

Seventh, evaluate tax changes for unintended consequences. Proposed changes should be assessed for their impact on investment, consumption, savings, compliance costs, competitiveness and revenue stability.

Eighth, establish measurable targets before announcements. Every major initiative should have a baseline, a timetable, an implementing authority and a method of independent verification.

Ninth, prepare contingency plans. The government should establish a credible response to lower-than-expected growth, weaker revenues, higher borrowing costs or external economic shocks.

Finally, communicate honestly. The Budget speech should distinguish between immediate relief, long-term investment, administrative reforms and outcomes that will take several years to materialise.

These precautions would help ensure that the Budget remains ambitious without becoming unrealistic.

7. How Should the Success of the Next Budget Be Measured?

The effectiveness of the Budget should be assessed through a public performance framework extending beyond the financial year.

These indicators should be interpreted carefully. Economic growth is influenced by global conditions, monetary policy, private-sector decisions and other factors beyond the Union Budget’s control.

Consequently, the government should distinguish between outcomes it directly controls and outcomes to which its policies contribute. Evaluation should use appropriate comparisons and independent evidence rather than attributing every economic change to a single budgetary decision.

8. Conclusion: India Needs a Budget That Produces Results, Not Merely Announcements

India possesses considerable economic potential. Its domestic market, entrepreneurial capacity, digital infrastructure, skilled professionals and expanding technological capabilities provide a strong foundation for future development. However, realising this potential requires more than ambitious expenditure targets and annual announcements.

The central challenge is to ensure that public resources are converted into productive assets, competitive enterprises, skilled workers, sustainable employment, improved public services and rising household incomes. India’s annual budgeting process should therefore evolve from a predominantly financial exercise into a disciplined instrument of economic transformation.

The Finance Minister must maintain fiscal responsibility, but fiscal responsibility should not be confused with an exclusive focus on reducing deficits. Equally, growth orientation should not mean indiscriminate increases in expenditure or borrowing. The appropriate objective is to maximise the long-term economic and social returns from every rupee of public money while preserving macroeconomic stability.

International experience offers useful lessons. Indonesia highlights the importance of improving spending quality and data; Vietnam demonstrates how implementation inefficiencies can diminish the returns on infrastructure investment; and Rwanda illustrates both the value of coordinated planning and the continuing need to strengthen execution. India should adapt these lessons to its own circumstances and build a budgetary system that rewards effective implementation, identifies underperforming programmes and allocates resources according to transparent development priorities.

The next Union Budget should establish a clear national commitment to measurable outcomes, employment-intensive growth, productive investment, human-capital development, stronger state-level implementation and transparent fiscal management. Ultimately, the success of a Finance Minister should not be measured by the length of the Budget speech, the number of schemes announced or the size of the expenditure figures presented before Parliament.

It should be measured by how much more productive the Indian economy becomes, how many meaningful employment opportunities are created, how much household incomes improve, how effectively public services are delivered and how sustainably the country advances towards shared prosperity.

That is the standard by which India’s future budgets should be prepared, implemented and judged.

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