Press Release
Vyomini Nathwani
The IMPRI Center for Habitat, Urban and Regional Studies (CHURS), IMPRI Impact and Policy Research Institute, New Delhi, hosted an interactive panel discussion on “Rural Realities and Union Budget 2026-27” on February 4, 2026 (Wednesday) at 11:30 a.m. IST under IMPRI’s 7th Annual Series of Thematic Deliberations and Analysis of Union Budget 2026-27, as part of IMPRI, bringing together leading economists and policy researchers to assess how the latest Budget addresses rural livelihoods, agriculture, gender equity and employment generation.
The discussion was chaired and moderated by Dr. J. Dennis Rajakumar, Director, Economic and Political Weekly Research Foundation (EPWRF), Mumbai; Visiting Senior Fellow, IMPRI. In his opening address, Dr. Rajakumar contextualised the Budget within recent labour-market and output trends, citing Periodic Labour Force Survey (PLFS) estimates that show declining rural unemployment and moderate acceleration in agricultural gross value added (GVA). He underscored the scale of allocations to the Ministries of Agriculture & Farmers’ Welfare and Rural Development, while signalling emerging concerns around scheme design, fiscal sufficiency and absorptive capacity.
Structural Constraints in Agriculture and Rural Transformation
Prof. Ranjit Singh Ghuman Professor of Eminence, Punjab School of Economics, Guru Nanak Dev University, Amritsar; Visiting Professor, IMPRI observed that agriculture continues to employ nearly 46 per cent of India’s workforce while contributing only about 15 per cent to GDP, underscoring persistent rural–urban income gaps. Referring to estimates that place average annual agricultural household income at around ₹35.940 in 2023–24 against a national per capita income of roughly ₹1.8 lakh, he highlighted the scale of inequality facing rural producers.
He analysed long-term trends in public investment, noting that capital formation in agriculture has remained weak compared to the overall economy. Prof. Ghuman argued that Budget allocations to agriculture and rural development remain modest relative to their employment share and developmental role. He stressed the need for stronger public spending on rural infrastructure and diversification into non-farm activities.
Spending Gaps and Utilisation Patterns
Prof. C.S.C. Sekhar, Professor, Institute of Economic Growth (IEG), New Delhi, focused on agriculture-sector expenditure trends. He pointed to repeated gaps between Budget Estimates and Revised Estimates across multiple schemes, signalling under-utilisation rather than funding scarcity, while noting that allocations in Rural Development, Animal Husbandry and Food Processing have largely been maintained. Prof. Sekhar welcomed measures such as livestock subsidies, promotion of livestock-based FPOs, duty-free fishing in the EEZ, cooperative tax exemptions and the ₹450-crore grant to the National Cooperative Exports Limited. However, he characterised most announcements as incremental and said sharper interventions were needed for women increasingly entering agriculture.
Rural Employment Allocations and Fiscal Sufficiency
Dr. J. Dennis Rajakumar, Director, Economic and Political Weekly Research Foundation (EPWRF), Mumbai; Visiting Senior Fellow, IMPRI analysed the Budget’s rural employment provisions. He noted that the new scheme, referred to as “Jai Gram”, has been allocated ₹95,000 crore, alongside ₹30,000 crore for MGNREGA, taking the total to ₹1.25 lakh crore, with a 60:40 Centre–State funding ratio.
Dr. Rajakumar flagged concerns over whether this provisioning can sustain the promised 125 days of work, especially given a reported decline of around 38 lakh active job-card holders in 2025–26. Based on rough fiscal calculations shared during the discussion, he observed that the outlay may effectively support only 50–55 days of employment per worker. He argued that clearer demand-driven financing and higher allocations would be required to preserve the scheme’s role as a rural safety net.
Structural Constraints in Rural India
Prof. R.S. Deshpande, eminent agricultural economist, placed the Budget within India’s long-term rural development context. He highlighted that agriculture still employs about 46 per cent of the workforce while contributing only around 15 per cent of GDP, and cited estimates placing average agricultural household income in 2023–24 at roughly ₹35,940, compared with a national per-capita income of nearly ₹1.8 lakh. Prof. Deshpande added that over 85 per cent of farmers are small and marginal landholders, remaining highly vulnerable to shocks. He argued that low public gross capital formation in irrigation and rural infrastructure continues to constrain productivity. He concluded that higher capital expenditure and non-farm diversification should have featured more prominently.
Gender Dimensions and Social Inclusion
Prof. Gummadi Sridevi, Professor, School of Economics, University of Hyderabad, rural development scholar and social-policy analyst, assessed the gender orientation of the Union Budget. She noted that women are listed as priority beneficiaries and welcomed initiatives such as STEM girls’ hostels, enhanced allocations to the National Rural Livelihoods Mission, and women-run SHG (Self-Help Groups) retail outlets. Prof Gummadi also highlighted persistent concerns around anaemia among SC/ST women, low rural female wages, high unpaid family labour and weak gender-responsive budgeting frameworks. She argued that marginalised groups remain unevenly covered across schemes. She concluded that stronger outcome-based monitoring, childcare support and labour-market integration were needed for genuine empowerment.
Implementation Capacity and Fiscal Governance
Dr. Jawed Alam Khan, Senior Fellow at the Centre for Budget and Governance Accountability and Visiting Senior Fellow, IMPRI, examined the Budget from a public-finance and delivery perspective. He observed that despite increased headline allocations, several rural schemes continue to record underspending, delayed releases and administrative bottlenecks at the state level. Dr. Khan stressed that weak expenditure absorption and monitoring systems dilute policy impact. He argued that stronger Centre–State coordination, real-time fund-flow tracking and institutional capacity building should have received greater emphasis. He concluded that governance reforms are central to translating budgetary intent into on-ground outcomes.
Rural Funds Utilization Hurdles
Ms Purvi Thangaraj, Policy Researcher, Indian Council for Research on International Economic Relations (ICRIER), observed that while rural and agrarian schemes account for roughly 12–13% of total Budget outlays, only a limited share translates into effective on-ground support. She highlighted that food and fertilizer subsidies alone absorb nearly 60–65% of rural allocations, constraining investment in productivity-enhancing sectors such as agricultural R&D, irrigation, and rural infrastructure. While the panel acknowledged the potential of technology-driven interventions and digital extension services, they noted that weak inter-ministerial coordination, delays in fund disbursal, and inadequate monitoring continue to limit the translation of allocations into measurable rural outcomes.
Conclusion
The panel noted that while the Union Budget 2025–26 raises allocations for rural India, only a fraction effectively reaches intended beneficiaries, with food and fertiliser subsidies continuing to dominate. Key concerns include under-spending, limited employment guarantee coverage, weak gender inclusion, and modest investment in agriculture and rural infrastructure. Technology-driven projects, livestock support, and women-focused initiatives were acknowledged, but structural constraints and administrative bottlenecks remain. Panelists emphasised that without focused execution and robust monitoring, the Budget is unlikely to deliver the intended improvements in rural livelihoods.
IMPRI’s 7th Annual Series of Thematic Deliberations and Analysis of Union Budget 2026-27
IMPRI 7th Annual Series of Thematic Deliberations and Analysis of Union Budget 2026-27
Watch the event at IMPRI #Web Policy Talk
Rural Realities and Union Budget 2026-27
Acknowledgement- This article is written by Vyomini Nathwani, an Intern at IMPRI.
