The Budget as Mirage, When Parliamentary Allocations Become Intentions, Not Obligations

The Budget as Mirage, When Parliamentary Allocations Become Intentions, Not Obligations

Every year, on the first day of February, the Finance Minister rises in the Lok Sabha to present the Union Budget. The chamber is packed. Television cameras capture every gesture. Markets oscillate in real-time. Editorials are written, analysed, and debated. The Budget is, by any measure, the single most anticipated and scrutinised economic event in India’s annual calendar. It is presented as the government’s binding fiscal contract with Parliament and the people—a solemn declaration of how public resources will be raised and spent, which schemes will be prioritised, and what developmental outcomes will be achieved.

But what happens after the Budget is passed? What happens to the ambitious allocations announced with great fanfare? What becomes of the flagship schemes unveiled as transformative interventions?

A growing body of evidence, meticulously compiled in the accompanying analysis, points to a disturbing, systemic reality: the Union Budget is increasingly a document of intent, not obligation. Allocations announced in Parliament are routinely undershot, particularly for complex, long-gestation human development and infrastructure schemes. By contrast, open-ended, demand-driven subsidies consistently overshoot their estimates, consuming fiscal space that was ostensibly earmarked for investment. Most critically, flagship schemes announced in previous budgets remain trapped in the purgatory of government processes—consultations, draft guidelines, cabinet notes, committees, pilots—years after their grand unveiling. The Budget has become a catalogue of intentions, and the gap between promise and practice is no longer an exception; it is the rule.

This is not a minor administrative inconvenience. It is a constitutional and democratic crisis. If Parliament-approved allocations do not bind the executive, if the government can unilaterally decide which Budget promises to keep and which to defer, then the very purpose of legislative control over the purse is subverted. The Budget risks becoming a ritual rather than a rulebook—a performative exercise in fiscal signalling to markets and voters, disconnected from the actual machinery of public expenditure management.

Part I: The Divergence—What the Numbers Reveal

The analysis presents a stark comparison between Budget Estimates (BE) and Actual Expenditure for a set of major schemes in 2025-26. The pattern is not subtle; it is a canyon.

1. Human Development and Infrastructure Schemes: Chronic Underspending

These are not marginal shortfalls. They represent tens of thousands of crores of rupees that were approved by Parliament for specific developmental purposes but were never released or spent. Every rupee not spent on Jal Jeevan Mission is a rural household that continues to lack piped water. Every rupee not spent on PMAY is a family still living in kutcha housing. Every rupee not spent on NHM is a pregnant woman who does not receive adequate antenatal care.

2. Subsidies: Persistent Overspending

The contrast is damning. Subsidies—open-ended, demand-driven, and automatically disbursed—consistently exceed their budgeted allocations, often by substantial margins. When global fertiliser prices rise or domestic consumption expands, the government finds the money. When monsoons fail and food procurement increases, the exchequer absorbs the additional burden. But when the Jal Jeevan Mission requires coordinated action with state governments, when PMAY needs land titles and beneficiary identification, when NHM requires recruitment of doctors and nurses—the money mysteriously disappears.

This is not a resource constraint; it is a priority constraint. The government has the fiscal capacity to absorb subsidy overshoots running into tens of thousands of crores. It chooses not to exercise that same capacity for developmental schemes.

Part II: The Implementation Purgatory—Where Schemes Go to Die

The underspending problem is not merely quantitative; it is qualitative and temporal. The analysis reveals that “almost none of the flagship schemes announced last year have reached full implementation.” They remain stuck in what can only be described as implementation purgatory:

• Consultations: Inter-ministerial meetings, stakeholder consultations, state government negotiations—extending for months, often years.

• Draft Guidelines: Multiple iterations, circulated for comments, revised, re-circulated.

• Cabinet Approvals: Notes moving between departments, seeking clarifications, awaiting placement before the Cabinet.

• Committees: Empowered committees, steering committees, technical committees, oversight committees.

• Pilots: Limited-scale trials in selected districts, results analysed, reports written, recommendations formulated—and then another round of consultations.

Some schemes never emerge from this process. Others emerge so late in the financial year that only a fraction of the allocated funds can be spent. Most are evaluated not on outcomes but on process milestones achieved—guidelines notified, committees constituted, pilots launched.

The perverse consequence is that announcements have become substitutes for delivery. A scheme that is “launched” with great fanfare, complete with a dedicated portal and a social media campaign, is treated as an achievement in itself. Whether it actually delivers water, housing, or health services is a secondary question, deferred to some future evaluation that never quite arrives.

Part III: The Political Economy of Underspending

Why does this pattern persist? Why do successive governments, regardless of party composition, consistently underspend on developmental schemes while overspending on subsidies?

1. Administrative Complexity vs. Automaticity:
Developmental schemes require active administration—coordination with states, identification of beneficiaries, resolution of disputes, monitoring of outcomes. Subsidies, by contrast, operate on automatic pilot. Once the policy framework is established, disbursement follows demand. The administrative effort required to spend ₹1 crore on urea subsidy is a fraction of the effort required to spend ₹1 crore on Jal Jeevan Mission. Faced with bureaucratic capacity constraints, the path of least resistance is to let subsidies expand and let schemes contract.

2. Visibility and Credit Claiming:
A subsidy reduction is visible and painful—farmers protest, industry lobbies, media reports. A scheme shortfall is invisible and painless—no one marches on Parliament because the Jal Jeeven Mission spent only 65% of its budget. The underspending is buried in the fine print of the Expenditure Profile, noticed only by a handful of budget analysts. Politically, it is far safer to overspend on subsidies and underspend on schemes than the reverse.

3. Federal Friction:
Most developmental schemes are implemented by state governments, with central funds routed through state treasuries. This creates multiple veto points—state governments may lack matching funds, may have different priorities, may be controlled by opposition parties. When central-state coordination breaks down, central funds remain unspent. The Centre blames the states; the states blame the Centre. Meanwhile, the intended beneficiaries receive nothing.

4. Fiscal Consolidation by Stealth:
The government is formally committed to reducing the fiscal deficit to 4.3% of GDP in 2026-27. Raising taxes is politically difficult. Cutting subsidies is politically dangerous. But not spending allocated funds on schemes is politically invisible. Underspending serves as a stealth fiscal consolidation mechanism, achieving deficit targets without the political costs of explicit expenditure reduction.

Part IV: From Fiscal Planning to Fiscal Signalling

The cumulative effect of these patterns is a fundamental transformation in the nature of the Union Budget. It has moved from being a fiscal plan—a binding commitment to raise and spend resources according to parliamentary approval—to a fiscal signalling device.

To markets, the Budget signals fiscal discipline through deficit targets and expenditure growth rates. The actual composition of expenditure matters less than the aggregate numbers that move bond yields and stock prices.

To voters, the Budget signals intent and aspiration. New schemes are announced, existing schemes are rechristened, allocations are presented as historic increases. The fact that these allocations will not be fully spent is unknown to most voters and forgotten by the next election.

To stakeholders, the Budget signals continued commitment. Farmers are reassured that fertiliser subsidies will continue. Industry is assured that infrastructure spending will increase. Civil society organisations are told that health and education remain priorities. These signals are delivered through Budget documents and reinforced through ministerial statements. Their relationship to actual expenditure is, at best, approximate.

The Budget has thus become decoupled from the budget. The document presented to Parliament on February 1 and the actual flow of funds through the treasury over the subsequent 12 months are increasingly unrelated. This is not fiscal policy; it is fiscal theatre.

Part V: Reclaiming the Purpose—What Accountability Would Require

The analysis concludes with a set of proposals to reclaim the Budget’s constitutional purpose. These deserve serious consideration.

1. Implementation Readiness as a Precondition for Announcement:
No new scheme should be announced in the Budget unless it has cleared a defined implementation readiness gate—including operational guidelines, state consultation, administrative capacity, and beneficiary identification mechanisms. The current practice of announcing schemes first and building capacity later invites the very implementation delays that have become endemic.

2. Realistic Timelines and Phased Rollouts:
Large, complex schemes should be phased over multiple years, with first-year allocations calibrated to actual absorptive capacity rather than political ambition. A Jal Jeevan Mission that aims to provide piped water to every rural household in five years is destined to underspend in year one. A mission that phases its rollout over seven years, with realistic annual targets, is more likely to achieve its objectives.

3. Accountability for Persistent Underspending:
The current framework imposes no cost on ministries for underspending. Indeed, underspending in one year often leads to higher allocations in the next, as ministries claim “enhanced requirements” to compensate for the previous year’s shortfall. This perverse incentive must be reversed. Ministries that consistently underspend should face reduced allocations, not enhanced ones—and their political leadership should be held accountable in Parliament.

4. Outcome-Based Budgeting:
The shift from input-based to outcome-based budgeting, initiated over a decade ago, remains incomplete. Budget documents should report not merely financial outlays and physical outputs (rupees spent, households covered) but developmental outcomes (sustained access to piped water, reduction in waterborne disease). Ministries should be evaluated on whether Budget allocations translated into intended outcomes, not whether they met expenditure targets.

5. Parliamentary Oversight and Audit:
The Public Accounts Committee and the Comptroller and Auditor General have traditionally focused on illegal or irregular expenditure. The emerging challenge is non-expenditure—funds approved by Parliament that are never released or spent. The audit mandate should be expanded to examine systematic underspending, its causes, and its consequences. Parliamentary committees should summon secretaries to explain why allocated funds remained unutilised and what corrective action is proposed.

Conclusion: The Budget as Broken Contract

The Union Budget is not merely a technical exercise in resource allocation. It is a constitutional contract between the executive and the legislature, and through the legislature, with the people of India. When the government presents its expenditure proposals to Parliament and seeks its approval, it enters into a binding obligation: that the funds appropriated will be spent for the purposes specified, in the manner intended, within the timeframe envisaged.

This contract is increasingly broken. Funds appropriated for Jal Jeevan Mission are spent on urea subsidies. Allocations approved for PMAY are diverted, through non-expenditure, to fiscal consolidation. Schemes announced as transformative interventions remain trapped in government files, years after their grand unveiling. The Budget has become a ritual without responsibility, a catalogue without commitment.

The question posed by the analysis is not rhetorical; it is existential: “What is the point of the Budget if the government is not bound by it?”

If the Budget does not bind the executive, if parliamentary approval does not obligate expenditure, if announcements do not imply delivery—then the annual Budget exercise becomes a simulacrum of accountability, a performance of transparency that conceals its opposite. The forms of democratic control over public finances remain in place, but the substance has drained away.

Reclaiming the Budget’s purpose will require more than technical fixes. It will require a renewed constitutional sensibility—an acknowledgment that the executive’s power to propose expenditure is matched by Parliament’s power to approve it, and that this approval carries binding force. It will require political leadership to resist the temptation of fiscal theatre and submit to the discipline of fiscal contracts. And it will require citizens, civil society, and the media to hold the government accountable not for its promises but for its performance.

Until then, the Union Budget will remain what it has increasingly become: a mirage of allocation, shimmering with intent, dissolving on contact with implementation. The water does not reach the tap. The house is not built. The health centre remains understaffed. And the gap between what is promised and what is delivered continues to widen, eroding not only developmental outcomes but the very credibility of democratic governance.

Q&A: The Union Budget—Promise, Performance, and the Accountability Deficit

Q1: What evidence does the analysis provide to demonstrate the growing disconnect between Budget promises and actual expenditure?

A1: The analysis provides two categories of evidence:

1. Comparative Expenditure Data (2025-26):

• Developmental schemes consistently undershoot: Jal Jeevan Mission (35% shortfall), PMAY (31% shortfall), Swachh Bharat Urban (37.5% shortfall), NHM (21.6% shortfall), Poshan Abhiyaan (35.3% shortfall).

• Subsidies consistently overshoot: Urea subsidy (+23.6%), Nutrient-Based Subsidy (+31%), Petroleum Subsidy (+45.5%).

2. Implementation Pipeline Status:

• “Almost none of the flagship schemes announced last year have reached full implementation.”

• Most remain stuck in “consultations, draft guidelines, cabinet approvals, committees, or pilots.”

• “Very few have translated into on-ground delivery, and almost none are at a stage where outcomes can be evaluated.”

This demonstrates that the divergence is not occasional or accidental but systemic and patterned.

Q2: Why do developmental schemes consistently underspend while subsidies consistently overshoot their Budget Estimates?

A2: The analysis identifies four structural factors:

The perverse equilibrium: It is politically easier and administratively simpler to overspend on subsidies and underspend on schemes. The government faces immediate, organised resistance to subsidy cuts but no corresponding accountability for scheme shortfalls.

Q3: What is meant by “implementation purgatory,” and why is it significant for understanding Budget credibility?

A3: “Implementation purgatory” describes the protracted, multi-stage process between a scheme’s Budget announcement and its operational launch:

Stage 1: Inter-ministerial consultations (months)
Stage 2: Draft guidelines, stakeholder comments, revisions (months)
Stage 3: Cabinet note preparation, inter-departmental clearances (months)
Stage 4: Empowered committee constitution, meetings (months)
Stage 5: Pilot projects, evaluation, report writing (years)
Stage 6: Scale-up planning, state consultations, fund flow mechanisms (indefinite)

Significance: This purgatory has transformed the Budget’s function. Announcement has become a substitute for delivery. A scheme that is “launched” with a portal and press conference is treated as an achievement, regardless of whether funds reach beneficiaries. The Budget is evaluated on its catalogue of intentions, not its record of implementations. This fundamentally undermines parliamentary control over the purse and citizen trust in government.

Q4: How has the Union Budget’s function shifted from “fiscal planning” to “fiscal signalling,” and why is this problematic?

A4: Fiscal Planning Model (Constitutional Intent):

• Budget presents binding expenditure commitments.

• Parliament approves specific allocations for specific purposes.

• Executive is obligated to spend approved amounts as specified.

• Accountability is measured by adherence to approved allocations and achievement of intended outcomes.

Fiscal Signalling Model (Current Reality):

• Budget communicates intent to markets (deficit trajectory, borrowing programme).

• Budget signals aspiration to voters (new schemes, enhanced allocations).

• Budget reassures stakeholders (continued subsidies, sectoral priority).

• Actual expenditure is decoupled from approved allocations.

• Accountability is measured by rhetorical consistency and aggregate deficit compliance, not scheme-level expenditure fidelity.

Why this is problematic:

1. Subverts Parliamentary Authority: The executive unilaterally determines which Budget promises to keep.

2. Erodes Democratic Accountability: Voters cannot evaluate government performance against its stated commitments.

3. Distorts Resource Allocation: Funds approved for water/housing are implicitly redirected to subsidies/fiscal consolidation.

4. Undermines Trust: When promises consistently exceed delivery, citizens lose faith in government’s word.

Q5: What specific reforms does the analysis propose to restore the Budget’s binding character?

A5: The analysis proposes five interconnected reforms:

1. Implementation Readiness Gate: No new scheme should be announced unless it has cleared defined readiness criteria—operational guidelines, state consultation, administrative capacity, beneficiary identification. Announce first, build later must end.

2. Realistic Phasing: Large schemes should be phased over multiple years with first-year allocations calibrated to absorptive capacity, not political ambition. A 5-year target with 7-year funding is more credible than the reverse.

3. Accountability for Underspending: Ministries that consistently underspend should face reduced future allocations, not enhanced ones. Persistent underspending should trigger parliamentary scrutiny and ministerial accountability.

4. Outcome-Based Budgeting: Shift from reporting financial outlays and physical outputs (rupees spent, households covered) to developmental outcomes (sustained access, quality improvement, health/education indicators).

5. Expanded Audit Mandate: CAG and Public Accounts Committee should examine systematic underspending as a form of fiscal non-compliance. Funds approved but not spent represent a breach of the executive’s budgetary obligation to Parliament.

Underlying Principle: These reforms seek to rebind the executive to the fiscal contract it enters with Parliament each February. Without such binding, the Budget is not a rulebook but a ritual—and rituals, however elaborate, do not govern.