The Union Budget 2026-27 gave a massive spending boost to the rural economy, thanks to a sharp increase in the allocations for the government’s flagship jobs scheme—Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). The push comes as the Centre begins transitioning away from MGNREGA to the revamped scheme.
Since the scheme is in a transitory phase, the budget provides funding for both the existing MGNREGA and its proposed successor, the Viksit Bharat—Guarantee for Rozgar and Ajeevika Mission (Gramin), or the G-RAM G Act, signalling a phased shift rather than an abrupt overhaul.
While MGNREGA has been allocated ₹30,000 crore, its lowest allocation in many years, the new G-RAM G scheme has received ₹95,692 crore, marking a decisive tilt in favour of the revamped programme. Together, the two schemes account for over ₹1.25 trillion in rural employment spending, and account for 2.4% of the total budgeted expenditure.
Rural development spending, which has been witnessing a steady decline in welfare allocations since the past four years, sees a noticeable revival in this budget. Thanks to the increased allocation to the rural jobs scheme, it rose to 5.1% of total expenditure from 4.3% in the previous fiscal year.
The reversal follows a period in which rural allocations were gradually pared back as pandemic-related pressures eased and employment demand moderated. The uptick reflects renewed policy attention to rural livelihoods, driven largely by changes to employment schemes.
On the other hand, agriculture spending has stabilised around the 3%-mark in the past few years. At 3.04% in 2026–27, it remains broadly unchanged from the previous year.
Meanwhile, subsidy spending continues to see one of the sharpest cuts over the years, from 12.7% in 2022-23 to 7.8% in 2025-26. The fall has been aided by lower food and fertiliser requirements and stable energy prices. Food and fertilizer together continue to dominate the subsidy bill, making up more than 96% of total subsidies in 2025-26, while petroleum subsidies remain marginal.
Other key sectors, including education and health have seen marginal uptick in allocations this year. However, their share in the total budgeted expenditure continues to be low.
In terms of the capital expenditure component, Centre’s share continues to shrink—it was 2.7% as a percentage of GDP in 2022-23 but has come down to 2.5% in 2026-27. However, transfers made up for the decline in Centre’s capex, by rising steadily to 0.6% of GDP.
By contrast, capital expenditure through public resources, which is the spending by central public sector enterprises—stands at 1.2% of GDP. This component, which captures investment raised and spent outside the Union Budget, has stayed weak over the past several years.
To conclude, the renewed emphasis on rural development and employment in 2026–27 stands out against a broader backdrop of subsidy compression and modest social sector increases, underscoring a budget that prioritises income support and job creation over broad-based consumption subsidies.