Union budget 2026–27 and rural resilience: Implications for water, agriculture, and livelihoods

The Union Budget 2026–27 signals a turning point in India’s rural development trajectory, as flagship programmes move decisively from rapid infrastructure creation to the harder task of sustaining services and livelihoods. Across drinking water, sanitation, agriculture, irrigation, and rural employment, the budget restores or stabilises allocations after a year marked by significant execution slippages, evident in sharp Budget Estimate–Revised Estimate (BE-RE) divergences in FY 2025–26. 

Jal Jeevan Mission: From infrastructure expansion to service sustainability

The Union Budget 2026–27 allocates ₹67,670 crore to the Jal Jeevan Mission (JJM), effectively restoring the programme to the scale seen in earlier years after a sharp contraction from JJM’s BE of ₹67,000 crore to just ₹17,000 crore in FY 2025–26 RE. At a headline level, this signals that the Union Government has not diluted its political or policy commitment to universal rural piped water supply. From a budget-analysis perspective, however, the real significance of this allocation lies in how it responds to the unusually large gap between BE and RE observed in the previous year—a gap that reveals deeper structural challenges in JJM’s current phase.

This contraction was not because targets were achieved ahead of schedule, nor because demand for rural water supply diminished. Rather, it reflected a transition in the nature of programme requirements. As household tap coverage has expanded rapidly, JJM spending has moved away from relatively straightforward capital works towards more complex and institutionally demanding components: source strengthening, water quality monitoring, energy costs, skilled manpower for operations, and verification of functional household tap connections. These components depend heavily on state capacity, timely state co-financing, and the strength of local institutions, all of which have constrained fund absorption.

The FY 2026–27 allocation assumes that these execution bottlenecks can be resolved without a major redesign of the programme’s fiscal architecture. Notably, the budget does not yet introduce a clearly demarcated window for operation and maintenance (O&M) or for source sustainability within JJM itself. 

Overall, Budget 2026–27 positions JJM firmly in a consolidation phase rather than an expansion phase. The restored allocation provides fiscal headroom to stabilise services, but the programme’s success will now depend less on the size of annual budgets and more on governance reforms, predictable O&M financing, and stronger integration with source-protection measures. 

Swachh Bharat Mission: Financing sanitation sustainability beyond ODF

The Union Budget 2026–27 continues to support the Swachh Bharat Mission (SBM), with allocations reflecting a clear shift from infrastructure expansion to sustainability, behaviour change, and service quality. For SBM–Grameen, the budget provides ₹7,192 crore, broadly in line with recent years, signalling that the programme has firmly moved beyond toilet construction into a consolidation phase focused on sustaining open defecation free (ODF) outcomes, managing solid and liquid waste, and strengthening local sanitation systems. 

A key feature of SBM’s budget trajectory is the relative stability of allocations combined with improved utilisation compared to drinking water programmes. In FY 2025–26, SBM–G Revised Estimates stood at around ₹6,000 crore, only modestly lower than the BE of ₹7,192 crore, indicating fewer execution bottlenecks. This reflects the programme’s mature institutional architecture at the Gram Panchayat level, where sanitation committees, routine incentive structures, and community monitoring mechanisms are already embedded. From a policy perspective, the SBM budget also highlights an important divergence from JJM. While JJM is grappling with sustainability and O&M financing gaps, SBM has more explicitly incorporated lifecycle considerations into programme design. Going forward, the effectiveness of SBM spending will hinge on how well sanitation services are integrated with water supply, public health monitoring, and urban–rural waste systems, rather than on further increases in headline allocations.

Agriculture and irrigation: Stabilising costs without structural transformation

Agriculture-related allocations in Union Budget 2026–27 indicate a continuation of a stabilisation-oriented strategy rather than a shift toward productivity-led or climate-adaptive transformation. The decision to hold PM-KISAN at ₹63,500 crore for a third consecutive year suggests that direct income support is now treated as a baseline entitlement rather than a counter-cyclical or expanding policy instrument. In real terms, this implies a gradual erosion of purchasing power, particularly as cultivation costs continue to rise due to energy prices, labour scarcity, and increasing climate variability.

The more consequential fiscal signal lies in the continued dominance of fertilizer subsidies. At ₹1.70 lakh crore, fertilizer support remains among the largest interventions in the Union Budget, only marginally lower than the FY 2025–26 RE. This confirms the state’s ongoing role in absorbing global price volatility to stabilise farm economics. While this approach cushions short-term income risk, it also entrenches structural distortions, including nutrient imbalance, declining soil organic carbon, and growing dependence on chemical inputs, with limited budgetary incentives for soil restoration or balanced nutrient management.

Irrigation policy under Budget 2026–27 is increasingly shaped by the energy–water–agriculture nexus rather than by fresh expansion of surface irrigation networks. Large and medium irrigation projects continue through ongoing commitments, primarily under Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), but strategic emphasis has shifted toward groundwater-dependent agriculture mediated through energy policy. Continued funding for KUSUM, alongside higher renewable energy allocations, reinforces a pathway in which irrigation costs are reduced through solarisation rather than through expansion or modernisation of canal systems.

This approach carries significant implications. Solar pumps reduce diesel dependence and farmer costs, but without concurrent water governance, they risk accelerating groundwater depletion. Budget 2026–27 does not explicitly address this tension. The absence of conditionalities linking solar pump deployment to micro-irrigation, crop planning, or aquifer budgeting represents a missed opportunity to align energy subsidies with water sustainability.

PMKSY continues to anchor irrigation spending, including support for water-use efficiency, restoration of water bodies, and completion of major projects under AIBP. However, the budgetary signals remain muted on deeper resilience measures such as crop diversification, soil moisture retention, and risk mitigation in rainfed systems. The emphasis remains on input affordability and cost control, rather than on incentivising water-efficient or climate-adaptive farming practices.

Rural employment and livelihoods: From safety net to economic platform

The most structurally significant shift in Budget 2026–27 is the reconfiguration of rural employment policy. The introduction of VB-G RAM G with an allocation of ₹95,692 crore marks a deliberate attempt to move beyond the MGNREGS framework toward a more integrated employment and livelihoods mission. Simultaneously, the MGNREGS allocation is reduced to ₹30,000 crore, suggesting a phased transition rather than abrupt withdrawal.

This redesign reflects dissatisfaction with the limitations of MGNREGS as a purely demand-driven safety net. While MGNREGS played a critical counter-cyclical role during economic shocks, its capacity to generate durable assets and long-term livelihoods has been uneven across states. VB-G RAM G seeks to embed employment within a broader rural economic strategy, potentially linking wage work to watershed regeneration, asset creation, and livelihoods promotion.

However, the risks of transition are substantial. MGNREGS developed a dense institutional architecture over nearly two decades, including social audits, demand registration systems, wage payment safeguards, and grievance redress mechanisms. These features transformed it from a simple public works programme into a rights-based entitlement. The success of VB-G RAM G will depend on whether these protections are preserved or diluted in the new framework. Any erosion of transparency or worker entitlements would undermine rural income security at a time when climate and labour market risks remain high.

However, this transition carries significant risks. MGNREGS developed a dense institutional architecture over nearly two decades, including social audits, transparency mechanisms, wage payment safeguards, and grievance redress systems. The budget does not yet provide detailed operational clarity on how this transition will be managed. Questions remain regarding eligibility criteria, demand registration, wage rates, fund flow mechanisms, and accountability systems. In the absence of early and clear guidance, there is a risk that states may struggle to operationalise the new scheme, leading to disruptions in rural employment provision.

Livelihoods promotion under NRLM complements this shift by focusing on self-employment, enterprise development, and women-led collectives. The increase in NRLM allocation to ₹19,200 crore reinforces the government’s confidence in SHG platforms as vehicles for income diversification and financial inclusion. However, scaling livelihoods beyond subsistence levels will require stronger market linkages, skill upgrading, and risk mitigation instruments—areas that still rely heavily on state capacity and convergence.

WDC-PMKSY 2.0 continues to operate under a multi-year funding framework (2021–26) with an indicative Central share of ₹8,134 crore for treating 49.50 lakh hectares of rainfed/degraded lands. While the Union Budget 2026–27 does not list WDC-PMKSY 2.0 as a separate headline scheme, its annual financing continues through the Department of Land Resources’ Demand for Grants under the PMKSY head, with transfers budgeted around ₹2,482 crore for FY 2026–27. Fund releases and project sanctions reflect ongoing implementation within the multi-year envelope, anchored by enhanced norms and renewed strategic focus on sustainability and livelihoods under the watershed paradigm. 

Conclusion

Drinking water and sanitation missions are now judged on service reliability and quality rather than coverage; agriculture and irrigation policy remains dominated by cost-stabilisation choices with unresolved sustainability trade-offs; and rural employment is undergoing a structural redesign whose success will depend on safeguarding rights while enabling asset and livelihood creation. The budget thus functions as a stress test of the rural state’s administrative and financial architecture. Its ultimate effectiveness will hinge on whether implementation systems can absorb funds predictably, align water and land investments with ecological limits, and manage transitions without eroding entitlements—outcomes that will only become visible well beyond the budget year itself.