Will Modi's electoral juggernaut steer the direction of Budget 2026-27?

With high-stakes Assembly polls for Bengal, Assam, Tamil Nadu and Kerala due in March-April, how election-oriented will Budget 2026-27, to be presented by Union Finance Minister Nirmala Sitharaman on February 1, be?

Over the past decade, the Union Budgets of the Narendra Modi government have, by and large, followed a pattern of craftily weaving electoral outreach into the exercise through allocations for sundry poll-bound states within programmes and schemes that are otherwise packaged as larger pan-India initiatives.

This approach allowed the Modi regime, for a better part of the last 11 years, to claim that unlike previous governments, it eschewed weaponising the Union Budget for electoral gains.

Disproportionate allocations

The last two Budgets, however, broke from this pattern. As the 2024 General Elections shaved off the majority that the BJP enjoyed on its own in the Lok Sabha, Sitharaman’s Budgets presented in July 2024 and February 2025 also changed in character.

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With the support of Nitish Kumar’s JD (U) and N Chandrababu Naidu’s TDP now vital for the longevity of the remodelled Modi regime, the two Budgets made brazenly disproportionate allocations to Nitish's Bihar, which was also due for polls in October 2025, and Naidu’s Andhra.

Likewise, with the electoral setbacks suffered by the BJP in 2024 attributed in part to the Opposition’s success in making rising unemployment an emotive poll plank, Sitharaman also unveiled a slew of employment-linked incentives (ELI) and internship schemes in the private sector to augment job creation.

Whether the upcoming Budget follows the post-2024 pattern of directly engaging with states due for polls and issues that could be difficult for the BJP to navigate electorally or returns to the pre-2024 trend will, of course, be known only on Sunday. There are, however, reasons to expect that Budget 2026 will embrace populism even if the broad strokes of the exercise follow Modi’s pre-2024 blueprint of shrewdly packaged big-ticket announcements with a Viksit Bharat imprint.

Scrapping of MGNREGA

The Budget comes within months of Parliament scrapping the UPA-era Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and replacing it with Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, or VB-G RAM G Act. Leaders from different INDIA bloc parties, including the Congress, told The Federal that it would be interesting to see how Sitharaman uses the Union Budget to offset the electoral damage the BJP could suffer due to the Centre’s controversial new legislation.

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Opposition parties like the Congress, Bengal Chief Minister Mamata Banerjee’s Trinamool Congress (TMC), Tamil Nadu Chief Minister MK Stalin’s DMK and the CPI(M) and CPI from the Left front have been united in their vociferous protests against the replacement of MGNREGA with VB-G RAM G. These parties, and others in the wider INDIA bloc, argue that the sole purpose of the VB-G RAM G is to dismantle the rural employment guarantee framework that MGNREGA had built over the past two decades.

Additionally, since the new law now places a 40 per cent cost sharing burden on the States – as opposed to the fully centrally funded MGNREGA – at a time when state governments, particularly those helmed by Opposition outfits, have been crying foul over lack of financial resources and increasing debt burden, these parties claim the cost-sharing formula under the VB-G RAM G is designed to deflect the Centre’s blame on the States over unemployment.

The Congress is already on a nationwide MGNREGA Bachao Sangram – a 45-day long protest demanding the restoration of MGNREGA – and is hoping that the campaign would help the party arrest the BJP’s growing electoral footprint in rural areas.

TMC warns of ‘befitting reply’

As such, the Opposition is cautiously waiting for Sitharaman to see how she tackles the political challenge that the repeal of MGNREGA has thrown up for the BJP.

“The Modi government had been trying for a decade to kill MGNREGA by reducing allocations and not clearing dues of States. In the winter session (last month), the government struck the fatal blow by repealing the Act and replacing it with a law that is more like a centrally-sponsored scheme but one where the Centre wrests all rights of the States while passing on all accountability and responsibility to them,” a senior Rajya Sabha MP of the Congress told The Federal.

The Congress MP added, “We would be very interested in seeing what the Finance Minister does on this front in the Budget. What kind of allocation will be made for VB-G RAM G? Will she bring some new scheme for job creation in the rural areas? What will she do to boost employment in general, considering that the ELI incentives she announced have fallen flat within a year and there is no credible data to suggest that those schemes actually helped in job creation.”

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The Trinamool Congress, which has long been at loggerheads with the Centre on the latter’s alleged refusal to clear dues owed to the Bengal government for MGNREGA over the last several years, believes the scrapping of the UPA-era law would cost the BJP dear in the Bengal elections due within two months from now. A Trinamool leader said any attempt by Sitharaman in the Union Budget to further “rob Bengal of its rightful share in central funds” will be met with “a befitting reply both in Parliament and on the streets of Bengal”.

Will FM favour Assam, TN, Kerala?

The Opposition would also be keenly watching what allocation the Sitharaman’s Budget makes for poll-bound Assam, a state the saffron party hopes to win for a third straight term, and for Tamil Nadu and Kerala, where the BJP is eyeing a huge disruption of the conventional electoral patterns that have largely been against it.

That the Prime Minister recently inaugurated the first Vande Bharat sleeper train from Bengal has triggered speculations that the Union Budget would have massive outlays reserved for Bengal and Assam in terms of train connectivity as well as highway infrastructure.

Opposition leaders from Kerala and Tamil Nadu say they expect the Budget to make “huge promises” for sectors like shipping, fisheries and highway infrastructure that directly impact economic activity in these southern states.