As the Union government prepares for the presentation of Budget 2026-27, the official narratives of economic resilience sit uneasily alongside persistent unemployment, in-formalisation of work, and shrinking social sector spending. While headlines in mainstream media suggest macroeconomic stability, lived economic realities, in particular for workers in the unorganised sector, tell a more troubling story. The upcoming budget must therefore be seen not in terms of the headline growth figures, but by its capacity to address structural employment deficits, revive household incomes, and rebuild public provisioning. Growth without employment: A structural failureIndia’s recent growth trajectory has not translated into broad-based employment generation. Organised sector expansion, which often gets reflected in GDP growth and stock market performance, only captures a narrow segment of the economy. At the same time, nearly 90% of India’s workforce remains concentrated in the unorganised sector. The cumulative impact of a series of economic shocks, including demonetisation, faulty GST implementation, the COVID-19 pandemic, and financial sector stress, has eroded informal livelihoods, small producers, and self-employed workers. Policy responses have disproportionately favoured capital-intensive sectors, leaving employment creation largely incidental rather than central to economic planning. Amidst this, concerns are being raised about unemployment and the growing disconnect between policy narratives and financial realities. The organised-unorganised divide and policy blind spotsMacroeconomic indicators overwhelmingly reflect the performance of the organised sector, rendering informal labour statistically and politically invisible. Additionally, there is a decline in policy attention to agriculture and farmers, as well as a gradual shift away from MNREGA towards discretionary rural employment initiatives and Gram Rozgar-type schemes, signalling a retreat from guaranteed employment as a state obligation. At the same time, the rapid expansion of e-commerce in Tier 2 and Tier 3 cities has disrupted small traders and local markets, intensifying precarity without adequate regulatory safeguards. It is also important to critically evaluate the reforms in technology, investment, fiscal management, and sectoral development, while emphasising the neglected, yet crucial, areas of education, health, and employment generation. To achieve the vision of a developed India by 2047, the country requires balanced state intervention, human resource development, and inclusive economic planning beyond a narrow focus on private-sector-led growth.Investment, trade pressures, and capital outflowsFrom a macroeconomic perspective, there is a need to encourage higher household savings and investment. Strengthening consumption capacity requires the creation of stable and predictable income sources, particularly for middle- and lower-income households. In the area of taxation, there is a strong case for simplifying and rationalising tax laws to ensure transparency, equity, and neutrality across credit and investment decisions. A more transparent and more predictable tax regime is essential for boosting investor confidence and reducing distortions in capital allocation.Emphasis must be placed on the necessity of enhancing productivity and competitiveness in the agriculture, industrial and service sectors, given the high tariffs imposed by the US government. Achieving this objective requires a combination of advanced technology adoption, improved infrastructure, and increased domestic savings and investment. Exporters and industrialists should be encouraged to diversify markets, expand scale, and invest in value addition, supported by targeted tax incentives.One of the primary concerns is the persistent outflow of capital. Foreign portfolio investments have been withdrawing rapidly, while Indian firms are increasingly investing abroad. Consequently, net capital outflows of $1.66 billion in September and $1.55 billion in October were recorded, underscoring the need to stabilise investment flows.Considering the depreciation of the Indian rupee and foreign exchange vulnerabilities, even as the rupee has fallen to nearly Rs 92 to a dollar and exports continue to decline at the same time, the government needs to initiate concrete measures to improve the situation. State finances, welfare, and politics of fiscal prudenceThe stability of state governments’ financial condition should be a key focus of the budget. It is argued that reforms are needed in subsidy structures and welfare schemes to achieve better targeting and fiscal prudence. Notably, all the political parties should be cautioned against populist scheme announcements during election periods. For example, during the Bihar elections, Rs 10,000 was transferred directly into women’s bank accounts, a measure criticised for its limited long-term economic impact.Instead, greater emphasis should be placed on capital expenditure on social infrastructure, which has higher growth multipliers, along with sustained efforts to reduce fiscal deficits. Some economists also called for rationalising the capital expenditure and fostering a culture of expenditure discipline within state governments.The introduction of an urban employment guarantee scheme, increased public investment in education and research and development, and a rethinking of development indicators beyond GDP is the need of the hour.Neglected priorities: Education, health, and employmentThe government’s focus on education, health, and vocational training has been lacking, despite ongoing issues with poverty, unemployment, and educated joblessness. The rapid growth in the number of educated youths without commensurate employment opportunities poses a serious risk to social and economic stability. To address this, the government should prioritise skill development and capacity building for productive employment.Moreover, the expanding role of the private sector in education and healthcare has rendered these services increasingly inaccessible to large segments of the population due to rising costs.To address this, public expenditure on education should be increased to 6% of GDP, and healthcare spending to 3% of GDP, compared to the current levels of approximately 3% and 2%, respectively. The dominance of the private sector in these critical sectors, such as health and education, should be reduced through strengthened public provisioning.Beyond GDP: Rethinking development and the role of the stateWhile the government aspires to make India a developed nation by 2047, achieving this goal requires sustained investment in human capital, expansion of the industrial sector, and the creation of employment opportunities for the youth. A coherent and integrated policy framework encompassing agriculture, industry, and services is crucial for achieving balanced and inclusive growth.Finally, the budget consultation process itself must be democratised. Beyond academic, consultancy firms, economists, civil society organisations and grassroots policy practitioners should be included to reflect on-the-ground realities. Although recent consultations emphasised private-sector-led growth, the current socio-economic context suggests that the role of the state cannot be diminished. In fact, the state’s responsibility in ensuring inclusive, equitable, and sustainable development has become even more critical.Jawed Alam Khan and Hurmuz Yuman are associated with Institute of Policy Studies and Advocacy, New Delhi.