Budget Promises vs Reality: Underspending Across Ministries Widens
A Mint analysis comparing budgeted outlays with actual expenditure between FY10 and FY26 reveals a troubling pattern of underspending across multiple ministries. While the annual Union budget spectacle captures national attention every February 1st, the true challenge lies in execution, with several ministries consistently struggling to utilize their allocated funds.
Wider and Deeper Underspending Trends
Data available since 2009-10 shows approximately a quarter of ministries (out of 53 listed by the government) have, on average, spent less than 80% of their budgeted allocations. The worrying trend has intensified in recent years, with 12-13% of ministries spending less than 50% of allotted funds between FY23 and FY25, compared to just 2-3% on average in the decade preceding the pandemic.
By FY25, nearly half of ministries utilized less than 80% of their allocations. While FY26 revised estimates indicate some improvement, these remain projections, with actual expenditure numbers only becoming available after provisional numbers release in May and final numbers in Budget 2027.
The Narendra Modi government demonstrated stronger utilization ratios in pre-pandemic years, when only 10-16% of ministries undershot allocations by more than 20%.
The Usual Suspects: Ministries with Chronic Underspending
While spending cuts have become sharper, each year reveals different ministries lagging against budget aims. Some ministries have consistently underperformed, spending less than 60% of their budgeted outlay in at least two of the last four fiscal years.
- Minority Affairs and Tourism have consistently undershot targets, with data points clustering well below the 60% threshold, indicating significant systemic bottlenecks in fund absorption, execution, or spending constraints.
- Labour and Employment and Micro, Small and Medium Enterprises also frequently miss spending targets by wide margins.
- Even ministries central to infrastructure and human capital, such as Jal Shakti and Skill Development, show erratic utilization with multiple years of sharp undershooting.
This pattern suggests that while the Union budget lays out ambitious developmental priorities, execution has struggled to keep pace, pointing to a persistent implementation gap that ultimately limits the scale and impact of national programmes.
Social Sector Performance: A Mixed Picture
An analysis of 10 of the 14 social sector ministries and departments reveals varied performance:
- Rural Development (including the rural jobs scheme MNREGS) and Culture perform best, spending more than their budgeted amounts on average at 107.4% and 103.4% respectively.
- Health and Education, the core pillars of social sector spending, have fared well utilizing above 90% of funds.
- However, social sector ministries struggling to deploy funds include Social Justice and Skilling, with the skilling ministry seeing the lowest fund utilization in the category at 59.1% on average during FY23-FY26.
While utilization rates may appear adequate for some ministries, this doesn't provide the full picture, as India's broader spending on health and education remains well below desired levels.
Flagship Scheme Stagnation
The Modi government has emphasized infrastructure-heavy programmes and targeted welfare delivery through cash transfers. Analysis of 11 flagship schemes shows six have, on average, utilized less than 90% of their funds in the last four fiscal years (the post-pandemic period).
Jal Jeevan Mission, aimed at providing tap water connections, utilized just 62% of allocated funds on average during this period. Swachh Bharat saw 63% utilization, while the government's housing programme, PM Awas Yojana, achieved 78% fund utilization. One of the poorest performers is the women empowerment scheme Mission Shakti at 61%.
Shortfalls in spending could indicate multiple factors including scheme saturation, poor programme demand, over-optimistic budgeting, or front-loading in earlier years reducing current needs.
Fiscal Squeeze and Consolidation Debate
The government has received both praise and criticism for its fiscal approach. While rapid fiscal consolidation has reduced the fiscal deficit from a pandemic-year high of 9.16% of GDP in FY21 to 4.31% of GDP by FY27, much of this consolidation has come through spending cuts rather than revenue increases.
Recent cuts in income tax and goods and services tax (GST) have further dried revenue streams, leading to a sharp expenditure cut of 30 basis points as a percentage of GDP in FY27, while the fiscal deficit is aimed to decline by just 5 basis points.
Since fiscal deficit tightening occurs largely through end-of-year spending cuts, as evident in ministry underspending patterns, the fundamental debate centers on whether the government should maintain its tight fiscal discipline or pivot toward increased welfare spending amid global uncertainties threatening to dampen growth and economic sentiment.
The persistent gap between budget promises and execution reality raises critical questions about governance efficiency and developmental impact as India navigates complex economic challenges.
