ExplainSpeaking: Do the govt’s Budget priorities align with Indian economy’s needs?

Dear Readers, A flurry of news since the presentation of the Union Budget — less than three weeks ago — has yet again superseded it. There is more interest in the likely impact of the India-US trade deal (of which many details are still missing) and the associated geopolitical realignment and resulting consequences. The second big issue is the rise of artificial intelligence (AI) and how it may transform the economy, and indeed threaten the Budget’s math. The question is: Are the Indian government’s Budget priorities aligned with the demands of the Indian economy? Not the first time This is not the first time a Budget presented by Finance Minister Nirmala Sitharaman, who now jointly holds the record of presenting the most number of Union Budgets for India, has been overtaken by what is happening elsewhere in the economy. Almost all of Sitharaman’s Budgets have been upended by some economic event or the other. In 2019, the biggest policy decision — cutting the corporate tax rate — came after, and outside, the Budget. It not only changed the Budget math for that year but for all future years. In 2020, the Budget calculations lost all meaning because by the time the financial year started, the country was already under a nationwide lockdown, and soon went into a technical recession. In 2021, as the economy was returning to normalcy, the Budget was upstaged by the deadliest of the Covid waves. In 2022, just weeks after the Budget was presented, Russia invaded Ukraine, triggering a dramatic surge in global inflation that swept through both the domestic and international economies well into 2023. In 2024, it was the result of the General Election that brought about a massive shift in the government’s Budget priorities. The interim Budget (presented before the General Election) stood out for being bereft of any political signalling — a decision that suggested the BJP felt assured of an even stronger mandate. The full-year Budget presented later in the year made a sharp course correction, given the underwhelming political outcomes for the ruling BJP. In 2025, Trump’s tariffs infused the policy uncertainty that undermined the Budget. Has India been preparing for policy challenges? It is immediately clear that India faces a rather odd policy challenge. On one hand, India is trying to further move towards self-reliance — this has been the key intent of the past several Budgets — and yet on the other it is entering more and more free trade agreements with different countries and economic blocs — a move that may require India to dilute its policy sovereignty and open up its economy to global competition. Further, the growing spectre of AI adds another layer of uncertainty to this already hazy picture. How will AI as well as more open trade impact India? More importantly, is India even prepared to deal with these challenges? At the same time, is India geared to deal with other issues such as pollution or a poorly skilled workforce. Has India, for instance, been working towards addressing these gaps in its economy? Looking back at Budget allocations The Budget data is a good place to understand India’s policy priorities and how they have changed over the years. This edition of ExplainSpeaking examines India’s Budget data and allocations to several key ministries — and their relative shares in the total government spending — to understand the policy priorities of the incumbent government and how they align with the key concerns that dominate news. Since Budget Estimates have routinely changed, the following exercise only looks back on the period for which hard data is available. In other words, all analysis uses data upto the end of the current financial year. The starting point for the data is 2009, the earliest year for which CMIE’s (Centre for monitoring Indian Economy) Economic Outlook module provides details. Data (see chart above) shows that typically the size of the Union Budget has grown by around 10.4% each year since 2009. That means, the total amount of money that the government spends each year is roughly 10% more than what it spent the year before. As such, across most ministries and departments, budget allocations also go up. For the purpose of this analysis, however, the focus will not be on the absolute amount of money spent on a ministry but whether that ministry’s share in overall budget expanded or shrunk or remained stagnant. The share of a ministry in the overall spending pie is what best shows whether the government is increasing or decreasing the priority allocated to it. The chart above, for instance, maps the relative share (in overall Budget) of three key ministries — agriculture, roads and railways. As the chart shows, while the relative shares of each of them have gone up over the years, ministries of roads and railways have received a significant jump post-pandemic. This aligns with the government decision to increasingly spend towards building physical infrastructure in the country as a way to connect the economy and reduce the costs of doing business. Together, ministries of roads and railways now account for almost 11% of the government’s total spending — a far cry from the less than 4% that was spent on it in the past (2009). Spending on agriculture, too, has increased in share, although not as sharply. The third chart, above, looks at another set of ministries that have seen their relative shares expanding albeit not as sharply. It is noteworthy, however, that the ministry of MSME continues to receive just 0.24% of the total budget spending. This hard data is in stark contrast to the government’s own push to create “Champion MSMEs” as part of its “kartavya”. The budget allocation also contrasts with the role that MSMEs play in the Indian economy. For instance, MSMEs are the second-largest employer in India after agriculture. MSMEs contribute 30% to India’s GDP and over 45% to India’s exports. Further, the chart above also shows that the share of allocations for health and family welfare has remained stagnant over a long period. Over a shorter term, its share has declined since hitting a high in 2017-18. This is a worrying trend for a country that now has the largest population on the planet and deep inequalities in access to healthcare. The chart above shows another area that has expanded its share in the overall budget. This is money spent on paying the interest on the government’s existing debt. Think of it as the EMI that the government must pay at the start of each month. This component has seen a sharp rise and as of the current year, one in every four rupees that the government spends goes towards paying back interest on old loans. This is noteworthy since, on the face of it, India is moving towards meeting the targets it has set for itself in terms of how much money it borrows from one year to another (called “fiscal deficit”) but when it comes to repayment, the interest burden is growing. The next three charts look at examples of some key ministries that lost favour (in terms of their relative share in the budget) over the years. For instance, as the chart above shows, the share of expenditure on defence is distinctly lower now than what it was in the past. It is also noteworthy that the share of allocations for ministries such as Panchayati Raj and Statistics, which were pretty small to begin with, have shrunk further over the years. The next chart, above, shows how the share of allocations to key ministries and departments —such as drinking water and sanitation as well as women and child development — are almost half of what they were in the past. Another area that often gets a lot of attention in the Budget speech is tourism and how it can create a lot of employment in India. But, as chart 6 shows, the share of allocation to the Tourism ministry has all but vanished over the years. At some point, reducing shares of allocations to sanitation, clean water and tourism will add up to give sub-optimal results. With reference to the threat of AI, the final chart, above, presents a sobering picture. The share of allocations to the ministry of skill development was 0.06% to begin with, and it has now slid to 0.05%. In this context, the decline in the share of allocation to the ministry of human resource development is also pertinent as it deals with the education of India’s youth. The upshot Looking at the share of allocation — its level and its trend — provides a good understanding of what a government’s priorities are. That’s because this is where it is actually spending its money year after year. The hard data serves as a basic tool to contrast any government’s rhetoric and promises with where it actually spends its money. Of course, budget allocations are not the only way to improve a situation nor is the Union Budget the sole budget for the whole country; states too have to do their bit. Yet looking at the picture emerging from these charts one is reminded of something that noted economist John Kenneth Galbraith had said: “I am worried about our tendency to over invest in things and under invest in people.” Are you happy with the emerging picture? Do you think these choices will help the Indian economy and its constituents straddle the changes AI is set to bring? Share your views and queries at udit.misra@expressindia.com Take care, Udit Misra is Senior Associate Editor at The Indian Express. Misra has reported on the Indian economy and policy landscape for the past two decades. He holds a Master’s degree in Economics from the Delhi School of Economics and is a Chevening South Asia Journalism Fellow from the University of Westminster. Misra is known for explanatory journalism and is a trusted voice among readers not just for simplifying complex economic concepts but also making sense of economic news both in India and abroad. Professional Focus He writes three regular columns for the publication. ExplainSpeaking: A weekly explanatory column that answers the most important questions surrounding the economic and policy developments. GDP (Graphs, Data, Perspectives): Another weekly column that uses interesting charts and data to provide perspective on an issue dominating the news during the week. Book, Line & Thinker: A fortnightly column that for reviewing books, both new and old. Recent Notable Articles (Late 2025) His recent work focuses heavily on the weakening Indian Rupee, the global impact of U.S. economic policy under Donald Trump, and long-term domestic growth projections: Currency and Macroeconomics: "GDP: Anatomy of rupee weakness against the dollar" (Dec 19, 2025) — Investigating why the Rupee remains weak despite India's status as a fast-growing economy. "GDP: Amid the rupee's fall, how investors are shunning the Indian economy" (Dec 5, 2025). "Nobel Prize in Economic Sciences 2025: How the winners explained economic growth" (Oct 13, 2025). Global Geopolitics and Trade: "Has the US already lost to China? Trump's policies and the shifting global order" (Dec 8, 2025). "The Great Sanctions Hack: Why economic sanctions don't work the way we expect" (Nov 23, 2025) — Based on former RBI Governor Urjit Patel's new book. "ExplainSpeaking: How Trump's tariffs have run into an affordability crisis" (Nov 20, 2025). Domestic Policy and Data: "GDP: New labour codes and opportunity for India's weakest states" (Nov 28, 2025). "ExplainSpeaking | Piyush Goyal says India will be a $30 trillion economy in 25 years: Decoding the projections" (Oct 30, 2025) — A critical look at the feasibility of high-growth targets. "GDP: Examining latest GST collections, and where different states stand" (Nov 7, 2025). International Economic Comparisons: "GDP: What ails Germany, world's third-largest economy, and how it could grow" (Nov 14, 2025). "On the loss of Europe's competitive edge" (Oct 17, 2025). Signature Style Udit Misra is known his calm, data-driven, explanation-first economics journalism. He avoids ideological posturing, and writes with the aim of raising the standard of public discourse by providing readers with clarity and understanding of the ground realities. You can follow him on X (formerly Twitter) at @ieuditmisra ... Read More