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Budget promises vs reality: Underspending across ministries get wider

February 12, 2026 5 min read Economics Polity & Governance GS2 (Governance) GS3 (Indian Economy Government Budgeting)
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What Happened

  • An analysis of Union Budget execution data reveals that several ministries have consistently failed to utilise their allocated funds, with underspending ranging from 0.3% to 78% across eight key ministries in 2024-25.
  • Major flagship schemes including Jal Jeevan Mission, Pradhan Mantri Awas Yojana (Urban and Rural), and Bharatmala Pariyojana utilised less than two-thirds of their budgets in 2024-25.
  • The Jal Jeevan Mission saw the most stark gap: against a Budget Estimate of Rs 67,000 crore, the Revised Estimate came down to approximately Rs 17,000 crore, leaving roughly Rs 50,000 crore unspent.
  • The Ministry of Labour and Employment, which funds social security schemes for unorganised workers (PM Shram Yogi Maandhan, PM Karam Yogi Maandhan), spent just over half its allocated budget.
  • The pattern of underspending raises questions about absorptive capacity, state-level implementation bottlenecks, and the credibility of budgetary allocations as policy signals.

Static Topic Bridges

Budgetary Process and Constitutional Framework (Articles 112-117)

The Union Budget is presented under Article 112 of the Constitution as the Annual Financial Statement, which details estimated receipts and expenditure for the financial year. Article 114 mandates that no money shall be withdrawn from the Consolidated Fund of India except under appropriation made by law passed by Parliament. This means Parliament authorises specific amounts for specific purposes through the Appropriation Act, and the Executive is constitutionally bound to spend those funds for the sanctioned purposes.

  • Article 112: Annual Financial Statement laid before both Houses
  • Article 113: Procedure for voting of Demands for Grants (Lok Sabha only)
  • Article 114: Appropriation Bill — no withdrawal from Consolidated Fund without Parliamentary authorisation
  • Article 266(1): Consolidated Fund of India — all revenues, loans raised, and receipts credited here
  • 24 Departmental Standing Committees examine Demands for Grants and submit reports to Parliament
  • Budget Estimates (BE) vs Revised Estimates (RE) vs Actuals — the gap between BE and RE itself signals anticipated underspending mid-year

Connection to this news: When ministries consistently underspend against Parliamentary appropriations, it undermines the constitutional budgetary framework. Parliament authorises funds based on stated policy priorities, but the Executive's failure to deploy those funds effectively negates the legislative intent behind the appropriation.

Fiscal Responsibility and Budget Management (FRBM) Act, 2003

The FRBM Act was enacted to institutionalise fiscal discipline, reduce India's fiscal deficit, and improve macroeconomic management. The Act set an original target of reducing fiscal deficit to 3% of GDP by March 2008 (later amended multiple times). The N.K. Singh Committee (2016) reviewed the framework and recommended revised glide paths. The April 2018 amendment removed targets for revenue deficit and effective revenue deficit, retaining only the fiscal deficit target of 3% of GDP.

  • Enacted in 2003; operational from July 2004
  • Original targets: eliminate revenue deficit by March 2009; fiscal deficit to 3% of GDP by March 2008
  • N.K. Singh Committee (2016): recommended fiscal deficit of 3% by FY2020, 2.8% by FY2021, 2.5% by FY2023
  • 2018 Amendment: fiscal deficit target of 3% by March 2021 with 0.1% annual reduction from FY2019
  • Escape clause: allows deviation of 0.5% of GDP in extraordinary situations (national security, calamity, sharp GDP decline)
  • Government borrowed directly from RBI prohibited from April 1, 2006 (ending deficit monetisation)

Connection to this news: Underspending creates a paradox within the FRBM framework. While lower expenditure mechanically reduces the fiscal deficit, it does so at the cost of developmental outcomes. The government's fiscal consolidation efforts have sometimes been aided by underspending rather than genuine revenue improvement, raising concerns about the quality of deficit reduction.

Centrally Sponsored Schemes (CSS) — Design and Fund Flow Architecture

Centrally Sponsored Schemes operate on a shared funding pattern between the Centre and States, typically in ratios such as 60:40 or 75:25 (90:10 for special category states). The fund flow involves the Centre releasing its share to State treasuries or implementing agencies, and States providing their matching contribution. Utilisation certificates (UCs) must be submitted by states before subsequent instalments are released.

  • CSS restructured in 2015-16 following the 14th Finance Commission's increase in tax devolution to states (from 32% to 42%)
  • Number of CSS rationalised from 66 to 28 core and umbrella schemes
  • Fund release mechanism: first instalment based on proposal approval; subsequent instalments contingent on UCs and expenditure reports
  • State matching share non-compliance is a key bottleneck — states with fiscal stress often cannot provide their share
  • Implementation bottlenecks: land acquisition delays, environmental clearances, contractor capacity, geographical challenges, and price fluctuations

Connection to this news: Much of the underspending in schemes like Jal Jeevan Mission and PMAY occurs because fund flow depends on state-level execution. States have flagged bottlenecks including uneven terrain, scattered rural habitations, groundwater depletion, adverse weather, price fluctuations, and delays in obtaining clearances — all of which slow utilisation of centrally allocated funds.

Role of the Comptroller and Auditor General (CAG) — Article 148

The CAG, established under Article 148 of the Constitution, audits all expenditure from the Consolidated Fund of India and the Consolidated Funds of States. The CAG's audit reports, presented to Parliament and State Legislatures, are the primary mechanism for post-expenditure accountability. Under Article 151, the President causes the CAG's reports relating to Union accounts to be laid before each House of Parliament.

  • Article 148: Appointment and conditions of service of the CAG
  • Article 149: Duties and powers — prescribed by Parliament (CAG's Duties, Powers and Conditions of Service Act, 1971)
  • Article 150: Form of accounts prescribed on advice of the CAG
  • Article 151: Audit reports laid before Parliament/State Legislature
  • Public Accounts Committee (PAC) of Parliament examines CAG reports and recommends corrective action
  • CAG audits check not just financial regularity but also performance and efficiency of expenditure

Connection to this news: Persistent underspending across ministries is exactly the kind of systemic issue the CAG highlights in its audit reports. The gap between allocation and utilisation raises questions about both the accuracy of initial estimates and the capacity of implementing agencies — both within the purview of CAG's performance auditing mandate.

Key Facts & Data

  • Eight key ministries showed underspending of 0.3% to 78% in 2024-25
  • Jal Jeevan Mission: BE Rs 67,000 crore vs RE approximately Rs 17,000 crore (about Rs 50,000 crore unspent)
  • PMAY-Urban: BE exceeded RE by Rs 19,794 crore
  • PMAY-Urban 2.0: BE exceeded RE by Rs 3,200 crore
  • PMAY-Rural: BE exceeded RE by Rs 22,332 crore
  • Ministry of Labour and Employment spent approximately 50% of its allocation
  • Only rural roads programme utilised more than two-thirds of its budget among major infrastructure schemes
  • CSS fund-sharing: typically 60:40 (Centre:State) for general states; 90:10 for special category states
  • Article 114: No money can be withdrawn from Consolidated Fund except under Parliamentary appropriation