Budget 2026: Not yet a gear shift

Every Union Budget invites a familiar ritual. Headline numbers are parsed, winners and losers identified, and political intent inferred from tax tweaks and spending promises. Yet this fixation on allocations often obscures a more consequential question. Does the Budget improve how the Indian state actually functions, or does it merely expand what the state promises to deliver.

Seen through this lens, the real test of any Budget is not how many schemes it funds, but whether it strengthens the institutions, regulatory frameworks and delivery systems that determine outcomes over time. On that test, the latest Budget shows growing awareness of the problem, but stops short of a decisive shift from schemes to systems.

At its core, the distinction is simple. Schemes are targeted interventions, often time bound and politically legible, designed to address specific problems or constituencies. Systems are durable capabilities, regulatory bodies, administrative processes, data institutions and fiscal frameworks that allow the state to deliver consistently, adapt to shocks and learn from failure. Schemes deliver benefits, systems deliver capacity.

The Budget’s rhetoric suggests an increasing recognition of this distinction. There is repeated emphasis on long term growth, productivity, competitiveness and resilience. However, when one examines where resources flow and how programmes are structured, the gravitational pull of schemes remains strong.

The most cited evidence of a systems-oriented approach is the continued emphasis on public capital expenditure. Investment in roads, railways, ports and urban infrastructure undoubtedly strengthens the physical backbone of the economy. Improved logistics reduce transaction costs, integrate markets and crowd in private investment. In that sense, capex does contribute to systemic improvement.

Yet capital expenditure alone does not constitute institutional reform. The Budget treats infrastructure largely as a growth lever, not as an opportunity to reform public project design, procurement standards, maintenance regimes or municipal finance. There is little discussion of how project appraisal capacity will be strengthened, how cost overruns will be reduced, or how asset maintenance will be sustainably financed. Without these reforms, capex risks becoming an annual spending target rather than a learning system.

A similar pattern is visible in digital public infrastructure. Continued support for digital platforms, payments systems and service delivery architecture has improved state reach and reduced leakage. These platforms represent a genuine governance advance. However, technology is still being asked to compensate for weaknesses in frontline administration rather than transform it.

The Budget does little to address persistent issues such as staff shortages in regulatory agencies, limited training of field officials, weak grievance redressal mechanisms and fragmented accountability across departments. Digital tools can streamline delivery, but they cannot substitute for administrative capacity. When platforms advance faster than institutions, efficiency gains eventually plateau.

On regulation, the Budget signals an intent to provide stability and predictability, particularly for manufacturing, logistics and finance. This signalling matters in an environment where policy uncertainty can deter investment. But signalling is not the same as institutionalisation.

Regulatory reform requires more than policy intent. It demands clear statutory mandates, adequate staffing, operational independence and credible enforcement. The Budget is largely silent on strengthening regulators as institutions. There are no meaningful allocations or reform roadmaps for regulatory capacity, evaluation frameworks or dispute resolution systems. Predictability is promised, but not structurally embedded.

The schemes bias is most visible in welfare spending. Existing programmes are extended, topped up or expanded, often with incremental improvements in coverage or benefit levels. There is little effort to consolidate overlapping schemes, sunset underperforming programmes, or integrate delivery across sectors such as nutrition, health and education.

As a result, the welfare architecture continues to expand in breadth rather than coherence. Fragmentation across ministries and levels of government persists, increasing administrative complexity and diluting accountability. Outcomes are still inferred from spending levels rather than measured against clear benchmarks. In such an environment, adding a new scheme is administratively easier than reforming the system that delivers them.

Outcome measurement remains a weak link. While performance and efficiency are frequently invoked, the Budget does not anchor major programmes to transparent outcome metrics or independent evaluation. Assessment remains largely internal to the executive, limiting feedback and institutional learning. Without credible evaluation, policy failure is hard to acknowledge and success difficult to scale.

Federal design further constrains systemic reform. States continue to receive a large share of funds through tied schemes with limited flexibility. This approach may ensure uniformity, but it also discourages local problem solving and innovation. Systems thrive when sub national governments have the fiscal and administrative space to adapt policies to context. Schemes, by contrast, privilege central design and compliance.

At this point, a fair objection must be acknowledged. A Union Budget cannot be expected to implement administrative reform, restructure regulators or redesign Centre–state relations in a single fiscal exercise. Institutional change often occurs through legislation, executive action and administrative practice outside the Budget. Expecting a Budget to do all of this would be unrealistic.

But this critique does not demand execution, it demands commitment. The Budget is the government’s most authoritative statement of priorities. It can signal direction through multi-year reform roadmaps, dedicated budget lines for institutional strengthening, explicit outcome frameworks and a willingness to consolidate rather than proliferate schemes. These are squarely within its remit. The absence of such signals is therefore a legitimate subject of scrutiny.

None of this implies that schemes are unnecessary. In a country with persistent poverty, inequality and regional disparity, targeted interventions remain essential. The issue is balance and trajectory. Over time, a state that relies primarily on schemes risks becoming reactive, fragmented and administratively overstretched. A state that invests in systems can deliver welfare more effectively, with fewer programmes and greater resilience.

What would a genuine shift from schemes to systems have looked like in this Budget. First, a conscious consolidation of welfare programmes, with fewer schemes backed by multi-year funding and clear outcome mandates. Second, meaningful investment in regulatory and administrative institutions, including staffing, training and independence. Third, a published medium-term roadmap for institutional reform alongside the Budget, covering regulation, data systems, fiscal governance and intergovernmental finance.

Such reforms are politically harder than announcing new schemes. They take time, carry risk and rarely deliver immediate credit. Yet they are essential if India is to sustain growth, manage climate and demographic pressures, and maintain fiscal credibility.

The verdict, then, is measured rather than sweeping. This Budget recognises the importance of stronger systems and gestures in that direction, particularly through infrastructure and digital investment. But it remains anchored in a governance model that privileges schemes over institutional redesign. It is a cautious Budget, focused on continuity and manageability rather than transformation.

Ultimately, the quality of a Budget should be judged not by how much it promises in a single year, but by how much capacity it builds for the decade ahead. On that measure, the shift from schemes to systems has begun, but it remains incomplete.

 The writer is a policy commentator focusing on taxation, governance, and economic reform.