N.B.: The views expressed are personal; usual disclaimers apply.
Context
A government budget serves as a financial blueprint outlining planned expenditures for the forthcoming fiscal year, drawn up on the basis of expected revenues and costs. The announcement of a state budget for the next year typically generates significant public interest in understanding both the revenue and expenditure aspects.
The election manifesto of the present ruling party in power in West Bengal outlined a comprehensive roadmap for infrastructure and development focused on transforming transport, maritime trade, and regional connectivity. Key promises included building modern deep-sea ports in Tajpur and Kulpi to revitalize maritime trade, alongside constructing a major National Highway that directly connects the Sundarbans to Darjeeling, effectively linking the state's North and South. To improve regional air and rail connectivity, the party pledged to operationalize the Purulia, Malda, and Balurghat airports under the UDAN scheme, resolve land hurdles to fast-track 61 stalled railway projects, and complete all pending Kolkata Metro projects. Additionally, the manifesto outlined plans to build four new cities, construct bridges over major rivers (including folding bridges in Haldia and Nandigram), and address ecological stability by setting up cyclone shelters and mitigating soil and riverbank erosion in vulnerable areas like the Sundarbans.
All eyes were set on the West Bengal Finance Minister Swapan Dasgupta when he presented the state budget on 22 June 2026. It was expected that the budget would break away from the tradition of allocating massive sums of money towards cash transfers and allowances under revenue expenditure, and would instead focus on building infrastructure by allocating more towards capital expenditure. In order to check whether the final state budget was a departure from the past trend, including the state interim budget announced on 5th February 2026, I am going to present and discuss some numbers.
Revex Vs. Capex
The expenditure side of a state budget is broadly divided into revenue expenditure and capital expenditure. Revenue expenditure covers the routine, day-to-day functioning of government departments and services, including items like employee salaries, interest on borrowings, and subsidies. Essentially, it refers to spending that does not create any lasting assets for the government. In contrast, capital expenditure involves investments in the creation or acquisition of assets such as land, buildings, machinery, and equipment, along with investments in shares, loans, and advances provided by the government to its public sector undertakings, corporations, and other entities.
Capex Trends
If the capex (net) related to general services, social services, and economic services are considered (by excluding loans and advances, repayment of loans to Central Government and others, transfer to Contingency Fund and expenditure for new programme/additional outlay), then it could be seen that there has been a cutback, from INR 41,315.4 crore to INR 40,930.3 crore between the interim and the final budgets presented this year. In case we consider the capex (gross) as a whole – comprising general services, social services, economic services, loans and advances, repayment of loans to Central Government and others, transfer to contingency fund, and expenditure for new programme/additional outlay – then we find that there has been a reduction of -0.3%, from INR 86,533.1 crore to INR 86,306.03 crore between the interim and the final budgets. Therefore, when it comes to capex in absolute terms, there has been no break from the past. Instead, it can be argued that in the interim budget of 2026-27, presented by former minister of finance Chandrima Bhattacharya, capex (gross) was hiked from INR 60,661.24 crore in 2025-26 (R.E.) to INR 86,533.1 crore, an increase of 42.6%. Even capex (net) was increased from INR 26,438.5 crore in 2025-26 (R.E.) to INR 41,315.4 crore in 2026-27 (B.E., interim), exhibiting a rise of 56.3%.
Image credit: Pexel
From 2010-11 to 2018-19, West Bengal's capex (comprising general services, social services, economic services, and loans and advances) as a percentage of total expenditure rose steadily from 3.6% to a peak of 12.2%, indicating a stronger emphasis on infrastructure development. However, it declined notably during the pandemic years, falling to 7.15% in 2021-22. It should be noted that after winning the 2021 West Bengal Assembly elections, the AITC (TMC) government led by Mamata Banerjee introduced and expanded several cash transfer schemes, most notably the Lakshmir Bhandar scheme.
In the latest years, there has been a partial recovery, reaching 10.4% in 2023-24 – one of the higher levels in the recent decade – before moderating to 7.3% in 2024-25. The budget estimates for 2025-26 show an improvement to 10.3%, although the revised estimates indicate a decline to 7.53%. In 2026-27 (Final B.E.), capex as a percentage of total expenditure stands at 9.5%, slightly lower by 0.8 percentage points compared to the interim budget estimates.
Emphasis on Social Welfare
The final West Bengal state budget for 2026-27 places a massive emphasis on social welfare, rural development, and women's empowerment through several flagship initiatives. A primary highlight is the newly launched Annapurna Yojana, which secures an immense allocation of INR 36,000 crore to provide monthly financial assistance of INR 3,000 to eligible women aged 25–60. To encourage higher education among girls, a one-time support of INR 50,000 for unmarried female undergraduate students has been granted INR 1,000 crore, alongside INR 550 crore dedicated to a state-wide free bus transportation fare waiver scheme for women. In rural employment and housing, the VB-GRAM G (Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission) is backed by INR 14,000 crore, while the rural housing scheme PMAY-G receives INR 13,000 crore to target 25 lakh new beneficiaries. Furthermore, the state introduces Ayushman Bharat (AB-PMJAY) with a budgetary provision of INR 3,100 crore to offer universal healthcare coverage.
These initiatives are heavily reflected in the massive financial net allocations made directly to the respective welfare departments for the fiscal year:
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Women & Child Development and Social Welfare: INR 52,308.50 crore
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Panchayats & Rural Development: INR 51,836.55 crore
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School Education: INR 44,948.21 crore (including INR 2,100 crore specifically earmarked for PM-SHRI model schools)
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Health & Family Welfare: INR 24,753.72 crore
The state budget also grants a 20% increase in the Dearness Allowance of the state government employees.
Recent Revex Trends
While revex was increased by 10.6% between the interim and the final budgets of 2026-27, capex was curtailed by 0.9% in the same period. Compared to the 2025-26 revised estimates, revex increased by 8.2% to reach INR 309,551.1 crore in 2026-27 (Interim B.E.) and by 19.7% to reach INR 342,469.3 crore in 2026-27 (Final B.E.).
Revenue receipts increased from INR 287,791.7 crore to INR 320,484.9 crore between the interim and the final budgets. The interim budget estimates of 2026-27 indicate that about 40.9% of revenue receipts came from tax devolution, 41.2% from the state's own tax revenue, 1.3% from non-tax revenue, and 16.6% from grants-in-aid. However, the final budget estimates show that 34.4% of revenue receipts came from tax devolution, 40.8% from the state's own tax revenue, 2.6% from non-tax revenue, and 22.3% from grants-in-aid.
Despite the hike in grants-in-aid from INR 47,615.5 crore in 2026-27 (Interim B.E.) to INR 71,393.2 crore in 2026-27 (Final B.E.), and also the state's own tax revenue from INR 118,668.8 crore to INR 130,669.7 crore in the same period, revenue deficit increased by 1%, from INR 21,759.34 crore to INR 21,984.41 crore. However, compared to the revised estimates of 2025-26, revenue deficit declined by -47.1% in the interim budget estimates and -46.6% in the final budget estimates.
Trends in Key Macro Stability Indicators
West Bengal's fiscal deficit as a percentage of GSDP has shown moderate fluctuations over the years. From 4.24% in 2010-11, it declined to 2.62% in 2015-16. Post the COVID-19 period, it rose again to 3.91% in 2020-21 and touched 3.42% in 2024-25. The latest budget estimates for 2026-27 shows a comfortable level of 2.91%, indicating improved fiscal consolidation efforts by the new government.
The state has significantly improved its revenue account position over the past decade. The revenue deficit as a percentage of GSDP stood high at 3.75% in 2010-11 but declined sharply to almost 1% by 2017-18, reaching a low of 0.94% in 2018-19. It rose again during the COVID period to 2.59% in 2020-21. The revenue deficit-to-GSDP ratio fell from 2.19% in 2024-25 to 2.07% in 2025-26 (R.E.) and further to 1.02% in 2026-27 (B.E.).
West Bengal's outstanding debt as a percentage of GSDP has remained elevated, generally hovering between 35.7% and 42.2% over a 17-year period. It stood at 40.65% in 2010-11, gradually declined to a low of 35.69% in 2018-19, but rose sharply during the pandemic to 42.21% in 2020-21 and 39.22% in 2021-22. In recent years, it has stayed around the 38% mark. The 2026-27 Budget Estimate (BE) projects debt at 37.98% of GSDP, indicating a marginal improvement and continued efforts toward debt sustainability.
Interest payment and debt servicing as a percentage of revex has declined from 17.43% in 2025-26 (R.E.) to 15.56% in 2026-27 (Final B.E.). This could be because of the increase in revex from INR 286,030.95 crore in 2025-26 (R.E.) to INR 342,469.26 crore in 2026-27 (Final B.E.) by 19.7%.
Conclusion
The 2026–27 West Bengal budget under the new Government represents a mixed picture. It maintains a strong emphasis on social welfare and women-centric schemes like Annapurna Yojana (with a massive INR 36,000 crore allocation), while achieving improved fiscal prudence, with a fiscal deficit of 2.91% and revenue deficit of 1.02% of GSDP, alongside a marginal decline in the debt-to-GSDP ratio to 37.98%. However, capital expenditure has not seen a decisive break from the past, showing only modest growth and a slight reduction from the interim budget, indicating that the much-anticipated infrastructure push is yet to materialise fully in this first budget of the new Government.
Going forward, greater emphasis on capital expenditure could help support the government's stated objectives of strengthening infrastructure, industrialisation, and employment generation while complementing its continued commitment to social welfare.
