This article is from a two-part series analysing the budget numbers and their sectoral allocations for FY 25-26. Read the first part here.
With the Union budget announced last week, the Narendra Modi-led Bharatiya Janata Party (BJP) government has once again paraded its so-called achievements from the budgetary announcements – billions allocated, millions covered, and grand proclamations of “Viksit Bharat (Developed India)” by 2047.
But beyond the glossy numbers, the very core welfare schemes of this administration – PM-Kisan Samman Nidhi, Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), and Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY) – are not testaments to success but glaring reminders of failure. If these schemes were truly delivering lasting impact in terms of intended outcomes, why do they still require expansion year after year? Why, despite a decade of Modi’s governance, are farmers still drowning in increased debt, have low incomes, with millions of Indians still unable to afford basic healthcare and quality education?
Launched in March 2020 as a pandemic relief measure, PMGKAY was meant to be temporary. And yet, four years later, the government has extended it for another five years at an estimated cost of Rs 11.80 lakh crore. More than 81.35 crore people are still dependent on five kg of free wheat or rice per month just to survive. This is an admission that this government’s economic policies have utterly failed to generate secure livelihoods.
If GDP growth rates are as robust as the government claims, why has poverty deepened to the extent that an emergency pandemic measure is now permanent? And with Rs 2 lakh crore allocated per year for free food, it’s fiscally hurting the budget.
The PM-Kisan Samman Nidhi, launched in 2019, was supposed to be a game-changer for farmers. But let’s break it down: the government has increased its allocation to Rs 63,500 crore for FY26, benefitting 11 crore farmers. Sounds impressive, until we realise that each farmer gets a mere Rs 6,000 a year (Rs 500 per month). To put that in perspective, the cost of a single bag of urea fertilizer is Rs 266, and DAP fertiliser costs Rs 1,350 per bag.
Diesel prices have surged, and climate-induced crop failures have skyrocketed. In states like Maharashtra, Punjab and Karnataka, where thousands of farmers have taken their own lives, how does Rs 500 a month even begin to address the structural collapse of India’s agrarian economy? The truth is, PM-Kisan is a cheap electoral gimmick – a meager handout dressed up as “farmer support,” while real agricultural reforms, including supply chain improvements and better price realisation mechanisms, remain ignored.
Also read: Union Budget 2025: Rise in Medical Seats Without Proportionate Increase in Faculty
Then there’s PM-JAY, launched in 2018 and promoted as the world’s largest health assurance scheme, covering 36 crore beneficiaries. Over Rs 1.16 lakh crore worth of hospital treatments have been authorised.
The government hails this as a revolution in healthcare, but what they conveniently ignore is this: where are the hospitals? More than 40% of hospitals under PM-JAY are private, meaning the scheme has only deepened privatisation of healthcare. Rural areas still lack specialist doctors, ICU beds, or even basic diagnostic facilities.
Modi boasts about free medical insurance, but an insurance card is meaningless when there’s no hospital nearby. And with public health expenditure still stuck at around 2.1% of GDP – far below the recommended 5% – does the government even care about building a healthcare system that works for the poor?
The 2025-26 budget could have been an opportunity to move beyond stopgap welfare measures and address deeper crises – joblessness, inflation, and failing public services. Instead, what we got was the same old formula: extend the schemes, allocate more funds, and claim victory. The fiscal deficit remains a concern at 5.1% of GDP, and while the government talks about fiscal consolidation, its reliance on welfare schemes to mask economic distress suggests otherwise. Inflation continues to erode purchasing power, and youth unemployment remains alarmingly high, yet the budget offers no structural solutions.
Modi government has now been in power for a decade, yet his government still needs to provide free food to two-thirds of the population, throw loose change at struggling farmers, and pass off insurance coverage as actual healthcare reform. If these schemes were truly effective, why do their budgets keep expanding instead of shrinking?
If Modi’s “New India” is shining, why are more people dependent on entitlement-based welfare today than when he first took office in 2014? The real success of any welfare programme is its gradual phasing out over time so that it is no longer needed in medium-to-long term. The fact that these schemes are still lifelines for hundreds of millions proves just how hollow the government’s development model is and its economic claims really are.
Source: IndiaDataInsights
A fiscal burden disguised as welfare: The hidden cost of India’s mega schemes
At first glance, schemes like PMGKAY, PM-Kisan and PM-JAY appear as acts of benevolence, grand gestures of a government committed to its people’s welfare. But a deeper look at the budgetary math reveals an uncomfortable truth – these programmes, while politically lucrative, are creating an unsustainable fiscal burden on the Indian economy.
The government borrows extensively to fund schemes like PM-JAY, PM-Kisan, and PMGKAY, but with Rs 5–6 lakh crore spent annually, where does this end? The fiscal deficit target is 4.5% of GDP by FY26, yet ballooning subsidies make that goal laughable. More borrowing means more interest payments, which already consume a huge chunk of government revenue, leaving little room for real economic investments.
Take PM-Kisan, which now costs Rs 63,500 crore annually. Over Rs 3.45 lakh crore has already been disbursed, yet rural wages have barely improved. Instead of boosting farm incomes through better procurement, rural industrialisation, or price stability, the government hands out Rs 6,000 per farmer – a politically convenient, but economically useless, sop.
Meanwhile, PMGKAY’s economic burden exposes India’s failure to create jobs, keeping 81 crore people hinged on free food. This isn’t welfare; it’s a survival mechanism for a broken economy. With reckless borrowing and no structural fixes, the government isn’t lifting people out of poverty – it’s ensuring they stay trapped in it while focusing on the next elections.
The missing roadmap: Where is the fiscal exit plan?
With the government targeting a fiscal deficit of 4.4% of GDP, the finance minister has promised fiscal discipline. But how does this align with an ever-growing welfare bill? Rs 5–6 lakh crore is spent annually on schemes like PMGKAY, PM-KISAN, and Ayushman Bharat, yet there is no plan for reducing this burden. What happens when borrowing is no longer an option?
India’s debt is rising, and interest payments already eat into a huge portion of revenue. If global interest rates climb or economic growth slows, deficit financing will become even riskier. Without a clear exit strategy, the government may be forced into drastic spending cuts or higher taxation, both of which could hurt long-term growth. This is not fiscal management – it’s postponing a crisis.
Also read: Why the Union Budget 25-26 Doesn’t Spark Joy (or Growth and Consumption)
But a real solution exists. Instead of expanding subsidies, India must focus on tax compliance, disinvestment, and structural reforms to increase revenue without excessive borrowing. Redirecting funds into infrastructure, technology, and industry can create lasting economic momentum. The goal shouldn’t be short-term relief – it should be building an economy where fewer people need government support at all. If backed by decisive reforms, this budget could mark the start of true economic self-reliance.
Anania Singhal also contributed to this article’s research.
Deepanshu Mohan is a Professor of Economics, Dean, IDEAS, and Director, Centre for New Economics Studies. He is a Visiting Professor at London School of Economics and an Academic Visiting Fellow to AMES, University of Oxford.
Ankur Singh is a Research Assistant with Centre for New Economics Studies (CNES) and a team member of its InfoSphere initiative.
