Praveen Soni
The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, has triggered deep concern and political unease in Himachal Pradesh, a hill state already battered by repeated natural disasters and mounting fiscal stress. Despite sustained demands from the state government and widespread public expectation, the budget has failed to provide any substantive financial relief to Himachal Pradesh, particularly by excluding the state from the Revenue Deficit Grant (RDG) framework. This omission alone is expected to cost the state nearly ₹40,000 crore over the coming years, dealing a severe blow to its fragile economy and development trajectory.
For Himachal Pradesh, the absence of RDG support is not a technical budgetary adjustment but a fundamental setback. The Revenue Deficit Grant has historically been a lifeline for hill and special-category states, compensating for structural disadvantages such as difficult terrain, limited industrial base, and high infrastructure costs. Under the 15th Finance Commission, Himachal Pradesh received approximately ₹35,000–40,000 crore as RDG, which helped sustain basic governance, salaries, pensions, and essential public services.
The 16th Finance Commission’s recommendation to discontinue RDG for small states, including Himachal Pradesh, has now translated into policy through the Union Budget, leaving the state exposed at a time when it is least equipped to absorb such a shock.
Chief Minister Sukhvinder Singh Sukhu had repeatedly raised the issue with the Centre, citing the extraordinary fiscal strain caused by consecutive disasters, declining revenues, and rising expenditure. However, the budget has made it clear that these appeals have gone unheeded.
The political ramifications of this decision are already unfolding. Naresh Chauhan, media advisor to the Chief Minister, termed the complete withdrawal of RDG as the most serious concern for the state, stating that Himachal has effectively suffered a direct financial loss of ₹40,000 crore. He pointed out that the state government had reasonably expected continued support from the Centre, given Himachal’s historical status as a special-category state and its vulnerability to climate-induced disasters.
Over the past three years alone, Himachal Pradesh has suffered losses estimated between ₹20,000 and ₹25,000 crore due to cloudbursts, landslides, flash floods, and infrastructure collapse. Hundreds of lives were lost, thousands of families displaced, and critical road networks, bridges, water supply systems, and power projects were damaged or destroyed. Yet, the Union Budget has not announced any dedicated disaster relief package for the state.
The only notable mention related to Himachal Pradesh is the announcement of “mountain trails,” aimed at promoting trekking, biking, and adventure tourism. While such initiatives may have long-term tourism value, they appear grossly inadequate when measured against the immediate humanitarian, infrastructural, and fiscal challenges facing the state. For many in Himachal, this announcement feels symbolic rather than substantive.
The budgetary silence on disaster mitigation, railway expansion, healthcare infrastructure, and agricultural support has further deepened the sense of neglect. Himachal Pradesh remains one of the most disaster-prone states in the country, yet it continues to rely heavily on central assistance for rebuilding and resilience planning. The absence of additional funds raises serious questions about how the state will finance reconstruction, strengthen infrastructure, or invest in climate adaptation.
Politically, the budget has exposed a widening gap between the narrative promoted by BJP leaders in the state and the reality reflected in central allocations. Over the past months, BJP MPs and senior leaders repeatedly claimed that Himachal Pradesh would receive substantial support from the Centre. These assurances were used to counter criticism from the Congress-led state government and to project alignment with the Modi government as an advantage.
However, the Union Budget has laid bare these claims. With no special package, no RDG continuation, and no major sectoral push, the credibility of these assurances is now under scrutiny. For the BJP leadership in Himachal, this presents a significant challenge, particularly in a state where public memory of disaster and loss remains fresh.
From a governance perspective, the withdrawal of RDG severely constrains the Sukhu government’s fiscal space. The state’s revenue generation capacity is limited, while expenditure obligations—salaries, pensions, disaster relief, and social welfare—continue to rise. Without central support, the government may be forced to either curtail development spending or increase borrowing, both of which carry long-term consequences.
Economists warn that reduced capital expenditure will slow infrastructure development, affect employment generation, and weaken rural economies. Road construction, health facilities, educational institutions, and irrigation projects—all crucial for a hill state—could face delays or downsizing. The ripple effect would be felt across sectors, deepening economic vulnerability for ordinary citizens.
Socially, the budgetary outcome has added to public anxiety. Many families are still rebuilding homes, livelihoods, and community infrastructure after recent disasters. For them, the expectation was not political favoritism but basic support and acknowledgment of their plight. The absence of such recognition has fueled a perception that Himachal Pradesh has been sidelined in national priorities.
Politically, this moment could shape future electoral narratives. The Congress is likely to frame the budget as evidence of central apathy toward Himachal, strengthening its argument that state interests are better protected through assertive regional leadership. For the BJP, the task of pacifying public sentiment may prove difficult, particularly if tangible relief does not follow in supplementary allocations.
The Union Budget 2026 has thus become more than a fiscal document for Himachal Pradesh—it has emerged as a defining political and economic marker. It underscores the challenges faced by smaller, disaster-prone states within a centralized fiscal framework and raises questions about equity, resilience, and federal responsibility.
As Himachal Pradesh looks ahead, the road appears fraught with challenges. Development ambitions, disaster recovery, and fiscal stability now hinge on how effectively the state navigates this funding vacuum. For its people, the budget has reinforced a hard reality: survival and progress in the mountains demand sustained support, not symbolic gestures.
Whether this moment prompts a recalibration of central policy—or reshapes political alignments in the state—will be closely watched in the months to come.