Budget 2026 likely to boost rural spending, expand job schemes, maintain capex push

The Centre is expected to retain its core fiscal strategy in Union Budget 2026, continuing to prioritise capital expenditure, employment generation and focused social sector spending, people familiar with budget preparations told Business Today. 

“The government’s approach has been consistent, boost growth through infrastructure-led investment, create jobs and strengthen social delivery. Budget 2026 will further consolidate these priorities,” a senior official said.

A significant thrust is likely to be placed on rural development, with allocations poised for a sizeable increase. The Ministry of Rural Development currently has an outlay of Rs 1.88 lakh crore for FY26, about 8% higher than the previous year. However, sources said the government is considering a double-digit hike in Budget 2026 to improve rural outcomes and revive consumption in hinterland markets.

“Rural spending is expected to see a meaningful step-up next year. A double-digit increase in the ministry’s allocation is very much on the table,” a source involved in the discussions told Business Today.

At present, three flagship programmes MGNREGA, Pradhan Mantri Awas Yojana–Gramin (PMAY-G) and Pradhan Mantri Gram Sadak Yojana (PMGSY) account for nearly 85 per cent of the Ministry of Rural Development’s expenditure, with allocations of Rs 86,000 crore, Rs 54,882 crore and Rs 19,000 crore, respectively.

But a structural shift in rural employment policy is underway. Officials said MGNREGA is slated for a comprehensive redesign, with the proposed Viksit Bharat Guarantee for Rozgar and Ajeevika Mission expected to replace the existing rural job scheme in FY27. The new framework is estimated to require an outlay of around Rs 95,000 crore.

“The thinking is to transition from a purely wage-based programme to a broader livelihoods mission that combines employment, skilling and income generation,” another official said.

Sources also indicated that allocations for rural housing and road infrastructure are likely to be enhanced as part of the government’s effort to strengthen village-level connectivity and asset creation.

In parallel, the PM Internship Scheme (PMIS) is set for a major expansion aimed at improving youth employability. According to people aware of the plans, the government is considering widening eligibility from the current 21–24 age group to 18–30 years, more than doubling the existing Rs 5,000 monthly stipend, and sharply increasing industry participation.

“The revamp will significantly scale up PMIS both in terms of coverage and financial support. The number of companies offering internships could rise from about 500 currently to nearly 6,000,” a source said.