Rajasthan's Critical Budget: A Blueprint for Top-Five State Ambition
If Rajasthan aspires to rank among India's top five performing states, the upcoming Budget 2026–27 cannot be a routine fiscal exercise. It must decisively address three fundamental questions: Will the state's economy grow faster than the national average? Will that economic expansion generate durable and meaningful employment opportunities? And will it sustainably raise per capita income for its residents? Mere growth is insufficient; what truly matters is whether this growth translates into job creation and a steady increase in average incomes, ensuring widespread prosperity.
The Imperative for Structural Transformation
Despite recent economic expansion, Rajasthan's per capita income continues to lag behind leading states like Tamil Nadu, Maharashtra, and Karnataka. Catching up demands not incremental adjustments but profound structural change. The budget must lay the groundwork for this transformation, moving beyond traditional approaches to embrace innovative strategies that foster long-term competitiveness and resilience.
Pillar One: Capital Formation with Fiscal Credibility
The first critical pillar is robust capital formation underpinned by fiscal credibility. Rajasthan must significantly increase capital expenditure and safeguard it from compression during periods of revenue stress. Capital spending should rise meaningfully as a share of total expenditure, while simultaneously placing the debt-to-GSDP ratio on a declining trajectory. A top-five state cannot rely on unchecked borrowing; fiscal discipline is paramount.
To achieve this, Rajasthan should institutionalize infrastructure recycling through SEBI-regulated Infrastructure Investment Trusts (InvITs). Completed, revenue-generating assets—such as highways, transmission networks, and renewable energy parks—can be monetized, with the proceeds reinvested into new infrastructure projects. This creates a virtuous cycle where capital circulates efficiently rather than accumulating as burdensome debt. A formal, multi-year InvIT roadmap with clear targets would sustain capital formation and strengthen overall fiscal sustainability.
Equally crucial is employment intensity. Every major infrastructure project must be evaluated not only for cost efficiency but also for the number of jobs created per rupee invested. Growth that fails to absorb labor will not effectively lift per capita income, making job-centric planning essential.
Pillar Two: Strengthening the Productive Base
The second pillar involves strengthening Rajasthan's productive base, particularly through support for Micro, Small, and Medium Enterprises (MSMEs). The Rajasthan MSME (Facilitation of Establishment and Operation) Act, 2019, has simplified regulatory entry, and the state has digitized several approval and compliance processes while enhancing single-window mechanisms. The next phase should focus on integration and liquidity.
Digital approval systems must be linked to structured payment-tracking and dispute-escalation mechanisms, especially in supply chains involving larger firms. A unified platform that monitors receivable cycles and enables timely intervention during delays would alleviate working capital pressures for MSMEs. Even modest reductions in payment cycles can significantly improve MSME expansion and hiring capacity, driving broader economic dynamism.
Pillar Three: Investing in Human Capital
Human capital forms the third pillar. Public education reform must shift from emphasizing infrastructure inputs to prioritizing learning outcomes. Foundational literacy and numeracy are non-negotiable, but competitiveness also requires alignment with emerging technologies. Public schools should embed computational thinking, digital fluency, and data literacy into the curriculum.
This approach is not about turning every child into a programmer but about building cognitive adaptability for a rapidly evolving economy. Reliable connectivity, teacher upskilling in digital pedagogy, and exposure to fields like robotics, renewable energy systems, and agri-tech tools can prepare students for Rajasthan's growth sectors. Public health is equally central to income growth, as high out-of-pocket medical expenses strain savings and push families into debt. Strengthening primary healthcare, preventive screening, and telemedicine reduces household economic volatility, ensuring a healthier and more productive workforce.
Pillar Four: Embracing Green Growth
The fourth pillar is green growth. Rajasthan's solar advantage positions it at the forefront of India's renewable energy transition, but the opportunity extends far beyond power generation. The state should encourage manufacturing of solar components, battery storage systems, and green hydrogen pilots, linked to skill development and industrial clusters. By doing so, Rajasthan can position itself not merely as a power producer but as a comprehensive green manufacturing hub, tapping into global sustainability trends.
Pillar Five: Empowering Local Self-Governance
Finally, local self-governance must be strengthened as an economic enabler. Urban local bodies and gram panchayats need predictable, performance-linked transfers tied to measurable outcomes such as property tax efficiency, sanitation, and water management. Governance processes in local government institutions should be fundamentally altered to improve transparency, predictability, and accountability. Strong local institutions enhance infrastructure execution and reduce leakages, while decentralized fiscal empowerment and better governance raise grassroots productivity, supporting sustained income growth.
Measurable Commitments for Budget 2026–27
To enter the top five, Budget 2026–27 should articulate three measurable commitments: sustained GSDP growth above the national average; a declining debt-to-GSDP trajectory over the medium term; and a rising share of capital expenditure financed increasingly through asset recycling rather than fresh borrowing. Growth without jobs will not significantly raise incomes, jobs without productivity will not generate prosperity, and income growth without fiscal discipline will not endure.
Rajasthan possesses the demographic strength, renewable energy advantage, and industrial potential to ascend into the top tier of Indian states. The opportunity is real and tangible. The pivotal question remains: Will the Budget 2026–27 rise to meet this transformative challenge, setting the stage for a new era of economic leadership and shared prosperity?
