How to Overhaul Public Schemes while Aiming for Fiscal Prudence

Schemes Under the Scanner: The Great Five-Yearly Clean-up of India’s Flagship Spending Instruments

By P SESH KUMAR

NEW DELHI, MAY 30, 2025 – In a bid to realign India’s massive scheme-based public expenditure with fiscal prudence and future-ready policy goals, the Ministry of Finance has kicked off an ambitious appraisal of all Centrally Sponsored Schemes (CSSs) and Central Sector Schemes (CSs).

This review, launched via a high-level workshop on May 29, 2025, marks the formal beginning of the evaluation process that will hopefully determine which schemes survive, morph, or perish as the country moves into the 16th Finance Commission period beginning April 1, 2026.

But this should not become a random spring-cleaning ritual. It needs to be a policy-mandated, precision-driven overhaul of nearly 314 schemes—54 CSSs and 260 CSs—that are set to expire on 31 March 2026 unless re-approved. The DNA of this reform was actually embedded in Budget 2016, where the then Finance Minister had declared that every government scheme should have a sunset clause and undergo third-party evaluation before being continued. That seemingly innocuous clause is now the mother clause of a full-fledged performance audit movement in public policy planning.

What makes this review significant is not merely its scale, but its direction. Chaired by Cabinet Secretary Dr. T.V. Somanathan and involving key stakeholders including the Finance Secretary, Secretaries of Expenditure and Economic Affairs, and officials from across Ministries, the workshop did more than issue a calendar. It attempted to set a reformist tone. Ministries were urged not just to tick evaluation boxes but to dig deep into the utility, architecture, and delivery performance of each scheme. Recommendations from evaluations are to be taken seriously—not as bureaucratic chores but as diagnostics for rationalizing or even retiring schemes that have lost relevance.

Promises, Mergers and Missed Opportunities: A Critical Look at the Last Review of CSS and CS Schemes

When the Government of India, in the wake of the 2016 Budget speech, formally adopted the principle of sunset clauses and third-party evaluation for Centrally Sponsored Schemes (CSSs) and Central Sector Schemes (CSs), it signalled an ambitious resolve to overhaul India’s cluttered scheme ecosystem. The vision was clean: eliminate redundant or underperforming schemes, merge overlapping programs, and align public expenditure with measurable outcomes. This approach was institutionalized in the review exercise conducted during 2020–21, just ahead of the 15th Finance Commission’s fiscal cycle. Expectations ran high—after all, this was the first full-cycle review since the new rationalization doctrine was announced.

At the heart of that earlier review was a growing frustration within the government with the proliferation of schemes across ministries. Many schemes operated in silos, had overlapping objectives, or delivered duplicative benefits. Ministries often launched new initiatives under political pressure or budgetary surplus, without retiring old ones. This resulted in scheme fatigue—on both sides of the system. Beneficiaries struggled to navigate multiple entitlement channels, while administrators found it hard to monitor delivery and ensure accountability.

The 2020–21 review, therefore, promised to be a surgical intervention. The Department of Expenditure and NITI Aayog were tasked with evaluating schemes—NITI focusing on CSSs and the ministries hiring third-party evaluators for CSs. The expectation was that, based on evidence, many schemes would either be terminated or consolidated into single-window frameworks. The larger idea was to reduce the number of schemes and sharpen their design to focus on tangible outcomes.

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Some success did follow. The government merged more than 130 schemes into about 70 during this exercise. In sectors such as agriculture, rural development, and education, consolidation was visibly attempted. For instance, multiple rural livelihood and employment schemes were brought under the umbrella of the Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM). In education, initiatives like Sarva Shiksha Abhiyan, Rashtriya Madhyamik Shiksha Abhiyan, and Teacher Education were bundled into Samagra Shiksha Abhiyan. This brought some coherence and administrative efficiency.

However, beyond these headline consolidations, the deeper promise of pruning the scheme ecosystem was only partially fulfilled. Many ministries, while technically merging schemes, retained the multiplicity in substance by keeping verticals operational within the umbrella. Instead of terminating obsolete programs, they were often subsumed into new umbrellas with only minor cosmetic changes. Schemes with similar objectives continued to coexist with differing nomenclature, allowing departments to preserve turf and retain budgetary control.

Worse still, political considerations frequently trumped evaluative logic. In an atmosphere where flagship schemes were associated with party identities and personal branding of ministers or Prime Ministers, there was institutional reluctance to sunset popular schemes—even if evaluations flagged limited impact. Ministries hesitated to retire schemes with entrenched stakeholder interests, fearing backlash from political constituents or bureaucratic allies.

Moreover, the performance of the evaluation ecosystem left much to be desired. While NITI Aayog’s Development Monitoring and Evaluation Office (DMEO) did attempt to create an evidence-based foundation, its reports often lacked the granularity or robustness to guide hard decisions. Third-party evaluations commissioned by ministries varied widely in quality, with some reduced to compliance formalities rather than genuine analytical audits. None of the significant schemes were subjected to rigorous, holistic and comprehensive performance audit by the CAG of India. The few audits were relegated to examination of implementation in only some states.

The intended shift to performance-based funding—allocating outlays based on outcome metrics—also remained patchy. While Aadhaar-based Direct Benefit Transfers (DBT) appear to have picked up pace and became the dominant mode of subsidy delivery, especially in rural schemes, the same cannot be said of performance budgeting. Ministries continued to chase outlays rather than outcomes. Convergence across ministries remained aspirational, not operational.

One of the unintended outcomes of the review was the creation of “super schemes”—umbrella programs so large and diverse that internal coordination became a new headache. These umbrellas often masked inefficiencies rather than resolving them, giving an illusion of consolidation without real integration.

In financial terms, while the review enabled a temporary plateauing of scheme-based outlays and some redirection toward capital expenditure, it did not significantly reduce the fiscal footprint of public schemes. The number of schemes did go down marginally, but the budgetary allocations remained large, and in some cases even expanded under politically sensitive headings.

In hindsight, the last such review was a mix of modest progress and missed opportunity. It may have succeeded in starting a new conversation around rationalization and in enforcing the discipline of evaluation and sunset dates. But it fell short of transforming India’s scheme architecture into a lean, agile, and impact-driven system. Ministries largely retained their empires, and the government refrained from rocking politically sensitive boats. The difficult decisions—terminating schemes with poor outcomes, rechannelling funds across ministries, or imposing hard performance benchmarks—were deferred for another day.

That day, perhaps, is now. The 2025 review offers a second chance to finish the job that the last one only began. With more mature tools, deeper Aadhaar integration, and a sharper policy narrative around India@100, this cycle must go beyond cosmetic pruning and usher in structural realignment. Only then will the lofty intentions of Budget 2016 be fully realized.

In comparison to the previous review done for the 15th Finance Commission cycle around 2020–2021, this cycle appears both more ambitious and more structured. Back then, the effort was focused on reducing overlap, introducing the idea of convergence, and shifting toward performance-based outlays. However, it lacked some of the institutional mechanisms and policy muscle that now exist. For example, Aadhaar-enabled Direct Benefit Transfer (DBT) penetration was still evolving then. Now, it is the default mode. “Just-in-time” release of funds is no longer an idea on paper—it is an expected norm. So is the mandatory linking of scheme continuation with measurable outputs and outcomes, evaluated either by the Development Monitoring and Evaluation Office (DMEO) in NITI Aayog for CSSs or third-party evaluators for CSs. CAG should also proactively undertake comprehensive all India performance audits of selected CSS and CS with independent beneficiary surveys where necessary which would incidentally assist Government tremendously in the review.

Who Failed the CWG Probe – CAG, CBI, ED, or Politics?

The stakes are enormous. Schemes under review span the entire breadth of the Indian policy spectrum—from maternal health and school nutrition to climate resilience and AI research. And the fiscal magnitude is no small matter: in FY 2025–26, the Centre has earmarked a capital expenditure outlay of ₹11.21 lakh crore. The review intends to ensure that a growing share of this pie fuels productive, measurable impact rather than getting trapped in administrative leakages or politically-driven dead weight.

A subtle but significant shift in this round of review is the increased emphasis on “challenge mode” funding—a reformist idea borrowed from competitive federalism, where states or ministries have to compete for funds based on innovative proposals and performance outcomes. This introduces market-like competition into the heart of a previously quota-based subsidy model. Ministries have been nudged to explore convergence—not only across their own vertical schemes but horizontally with schemes of other ministries. For example, rural housing can no longer operate in isolation from sanitation, electricity, and drinking water.

This is not to suggest that the earlier review achieved little. It did lead to consolidation of several schemes—for instance, the merger of multiple rural development schemes under umbrella programs, introduction of the DBT framework, and more accurate targeting of beneficiaries. However, challenges persisted. Many ministries pushed cosmetic tweaks rather than deep reforms. Several schemes were continued with minor renaming or reframing, sidestepping the difficult question of effectiveness versus political optics.

The 2025 review seeks to change that culture. The message from the workshop was unambiguous: only schemes that deliver results and demonstrate alignment with the India@100 vision—India’s roadmap to becoming a developed nation by its centenary of independence—will be spared. The rest may face a sunset not just in name, but in deed.

Furthermore, the review process has taken a more holistic view of public expenditure by pushing for the unification of planning, budgeting, and fund release under a coherent, performance-linked umbrella. Avoiding “parking of funds”—a notorious bureaucratic habit—is now as important as improving last-mile delivery. Savings from discontinued or merged schemes will be ploughed into capital expenditure or new initiatives that better serve national priorities.

Expected outcomes? At a structural level, a leaner, sharper, and better-targeted scheme architecture. At a fiscal level, more elbow room for productive investment. And at the citizen level, hopefully, faster, simpler, and more transparent access to services and entitlements.

The current review of CSSs and CSs should not end up as a bureaucratic paperwork drill—it should be a tectonic attempt to reinvent how the Indian state allocates and spends money. By fusing the discipline of sunset clauses with outcome-based evaluations, and marrying policy ambition with fiscal realism, the Ministry of Finance has at least signalled that the era of unchecked scheme proliferation is over.

Unlike the previous round, which cautiously pruned and rearranged the scheme landscape, this cycle could well redraw the blueprint of India’s public spending architecture. If done right, this review will not only streamline governance but also unlock critical fiscal space as India marches toward its 2047 goals. CAG has a significant responsibility in the matter and hopefully, it does not shy away from contributing its mite. The next five years will test whether the government can match this rhetoric with real reform—or if old habits will again dilute new resolve.

(This is an opinion piece; views expressed solely belong to the author)

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