Assam’s Budget 2026-27 is high on ambition but tight on funds

Finance Minister Jayanta Malla Baruah rose in the Assam Assembly to present his first budget, and also the first of the second term of Himanta Biswa Sarma’s government, with a Rs 1.57 lakh crore spending plan for 2026-27. Stripped of the Kautilya quotations and the Bhupen Hazarika centenary framing, it is a document that reveals both how far Assam’s economy has travelled and how narrow the road ahead has become.

Assam’s economy is expanding quickly. Its Gross State Domestic Product is projected to touch Rs 8.71 lakh crore in 2026-27, growing at nearly 16 per cent a year in money terms, faster than the national economy. Assam’s share of India’s GDP has climbed from 1.65 per cent in 2016-17 to 2.09 per cent now. Per capita income has more than tripled in a decade, from about Rs 60,000 to Rs 1,85,429.

That is the good news the government leads with. But the growth sits on a shallow revenue base. The state still cannot pay for itself. Of every rupee Assam expects to spend from its main account in 2026-27, roughly 64 paise will arrive from the Central government.

Most of Assam’s own earnings, about 36 per cent, is tax, including SGST, sales tax on petroleum, excise on liquor and vehicle tax. Non-tax income is about 15 per cent of the state’s own revenue and 5 per cent of the total revenue, leaning heavily on crude oil and natural gas royalties. The government has set a target: raise its own revenue share from 36 per cent to 50 per cent by 2031. It is the right ambition. But the budget does not yet show how it will be met.

The spending side is dominated by bills the government has no choice but to pay. Salaries, pensions and interest on past borrowing together consume about 63 per cent of all revenue spending. Only after these committed costs are met does money become available for schemes, welfare and running the state.

By department, the biggest allocation goes to School Education, roughly Rs 18,870 crore, followed by Roads and Bridges at Rs 10,745 crore. School and Higher Education together take Rs 22,667 crore, about 14.5 per cent of total spending, roughly one rupee in seven. That looks generous beside the Union government, which spends barely 2.6 per cent of its budget on education.

But the comparison misleads, because schools are a state subject and Delhi was never meant to be the main spender. Against the honest benchmark—other states, where education typically claims 14 to 15 per cent—Assam sits right at the norm. And against the yardstick that matters, the National Education Policy’s target of 6 per cent of GDP from Centre and states combined, Assam falls short: its education spending is about 2.6 per cent of state income, modest for a state where two in five people are children.

The deeper worry is what the money buys. Of the Rs 17,156 crore for school education on revenue account, the overwhelming share is teacher salaries. Only Rs 1,713 crore is capital, the money that builds classrooms, labs and toilets. The budget stays silent on the outcomes—dropout rates, learning levels, enrolment—that would show whether 14.5 per cent is buying results or merely paying to keep the lights on.

Capital spending—money used to create lasting assets—is pegged at Rs 29,451 crore, with a promise to raise it by at least 10 per cent annually. A decade ago, it was below Rs 3,000 crore. Such a tenfold increase can transform the economy because roads, power lines and other infrastructure generate more activity than an equivalent amount spent on salaries or subsidies. Sustained over time, this can expand Assam’s revenue base and reduce its dependence on the Centre.

But the headline figure is softer than it appears. The budget acknowledges that part of the recent surge came from converting loans to power companies into equity, an accounting change rather than new infrastructure on the ground. More importantly, capital spending as a share of the economy is projected to fall from 3.46 per cent to 2.26 per cent by 2031-32.

The budget is built around 18 flagship schemes—the Ashtadash Mukutar Unnoyonee Mala, the 18 jewels—running from jobs and welfare to roads, power, land rights, health, tourism and a new capital region around Dibrugarh. The headline jewel is employment. Having claimed over 1.64 lakh appointments in five years, the government now promises two lakh more.

But it is important to be clear about the nature of these jobs. The two lakh positions are in government departments, universities, medical colleges, the police, statutory bodies, Sixth Schedule councils and state-owned companies. Every recruitment creates a long-term fiscal commitment, adding to salaries and pensions, which already consume 63 per cent of expenditure. With pension spending more than doubling since 2018-19, these appointments will raise the state’s committed expenditure for decades.

Which is why the more consequential promise sits elsewhere, in the effort to create private jobs the government does not have to pay for. Under “Advantage Assam”, the government points to its February summit, which it says drew commitments worth Rs 5.18 lakh crore, of which Rs 3.10 lakh crore is claimed under implementation, projected to generate about 1.02 lakh direct and indirect jobs. The Tata semiconductor facility at Jagiroad is due to begin production in November. A fertiliser plant at Namrup is being revived. Industrial parks, land banks and a friendlier incentive regime are promised to pull in the next wave.

A separate set of jewels chases self-employment. Atmanirbhar Asom Abhijan hands interest-free loans to young entrepreneurs, aiming to back 1 million over five years, while Mahila Udyamita has given some 3 million women Rs 10,000 each in seed capital. So the budget does address private and self-employment, not just sarkari naukri. The real test is whether summit promises translate into factories and jobs.

Welfare gets over Rs 6,000 crore. The marquee schemes—Orunodoi cash support, now reaching nearly 40 lakh households, Nijut Moina and Nijut Babu for students, Mahila Udyamita seed capital, a Rs 200-per-quintal top-up over the minimum price for paddy farmers—were paused during the election and resume from August. Two conditions are new and pointed: anyone practising polygamy, and anyone convicted of a crime, will be barred from benefits.

On infrastructure, the government announced Asom Mala 4.0—800 km of new roads for Rs 10,000 crore—alongside central projects worth over Rs 55,000 crore, including the Guwahati Ring Road, the Silchar high-speed corridor and a Brahmaputra tunnel between Gohpur and Numaligarh.

Four areas stand out beneath the main budget. The Child Budget is the largest at Rs 19,199 crore, or 12.25 per cent, mainly for education, health and nutrition, though child protection gets only Rs 160 crore. The Gender Budget allocates about Rs 12,160 crore across 300 schemes. The Green Budget is Rs 8,648 crore, focused more on flood adaptation than emission cuts, while its share has fallen from 6.44 per cent three years ago to 5.51 per cent. A separate Divyang statement adds to what is one of India’s more developed inclusive-budgeting frameworks.

This is a deficit budget, as every borrowing-financed state budget must be. The fiscal deficit is projected at Rs 26,186 crore, pegged at precisely 3.00 per cent of GSDP. That number matters because 3 per cent is the ceiling written into the Fiscal Responsibility law. Assam’s budget does not sit comfortably below that limit. It sits exactly on it. The revenue account is shown as exactly balanced at Rs 1,18,562 crore. The government claiming it will no longer borrow to pay salaries, only to build. That is a real improvement over 2024-25, when the state ran a Rs 3,000 crore revenue shortfall, borrowing to meet its grocery bill.

But two things sit uneasily beside the tidy arithmetic. A deficit resting exactly on the 3 per cent line leaves no room for error. A shortfall in central transfers, a bad flood year, a dip in oil royalties, and the state breaches its own legal limit. And Assam has crossed that line before, repeatedly—4.43 per cent in 2024-25, a steep 6.30 per cent in 2022-23, 4.40 per cent in 2021-22. The budget promises discipline the recent record does not show.

What’s encouraging is that budget utilisation has risen from 58 to 85 per cent. Own tax revenue has tripled in a decade. Capital spending on roads and power has multiplied roughly nine times. The 16th Finance Commission rewarded Assam’s performance by raising its share of central taxes, worth about Rs 50,000 crore this year. Debt, at about 25 per cent of GSDP, remains below the 32 per cent cap.

However, interest payments have grown nearly 146 per cent in six years, and on the Reserve Bank’s yardstick, interest now eats past the 10 per cent prudential line. The government itself admits it has “touched the saturation point”. Outstanding debt rose from Rs 55,008 crore in 2019 to Rs 1.62 lakh crore in 2025, and the government’s own projections show the debt-to-GSDP ratio crossing the 32 per cent legal limit by 2032-33—debt growing faster than the economy that services it.

Government guarantees—promises to repay if a state company defaults—jumped from Rs 78 crore in 2020-21 to Rs 2,690 crore in 2024-25, almost all backing the Assam Infrastructure Financing Authority. These become real debt the moment a guaranteed entity fails.

Besides, the revenue account is running on fumes. The Fiscal Responsibility statement projects that day-to-day spending will start outpacing day-to-day income from 2026-27 onwards, with the gap “widening progressively”. When 63 paise of every revenue rupee is already locked into salaries, pensions and interest, there is almost nothing left to absorb a shock or fund something new without borrowing more.

This is an ambitious but fiscally stretched budget. It gets the broad priorities right—capital investment, education, welfare, industrialisation and jobs—but relies too heavily on central transfers, borrowing and optimistic projections. Assam is spending more efficiently and growing faster, yet its revenue base remains weak, committed expenditure is rigid and debt pressures are mounting. The budget can become transformative only if investment pledges turn into private employment, capital outlay creates real assets and own revenue rises sharply. Otherwise, the government risks financing today’s political promises with tomorrow’s fiscal burden.

(Kaushik Deka is the Managing Editor of India Today Magazine and Editor of India Today NE)