Core Directive from Finance Ministry
- Only schemes with proven effectiveness via evaluation reports will be allowed to continue beyond FY 2025–26.
- All Central (54) and Centrally Sponsored Schemes (260) expiring by March 31, 2026, will undergo reappraisal.
- Evaluation conducted by:
- Third parties (for Central Schemes)
- NITI Aayog (for Centrally Sponsored Schemes)
Relevance : GS 2(Governance)
Sunset Clause Mandated
- Every scheme must have a defined sunset date — discourages indefinite continuation.
- Ensures fiscal prudence and accountability for outcomes.
- Objective: Improve the quality of government expenditure by ending unproductive schemes.
Caps on Funding & New Outlay Norms
- Future outlays restricted to 5.5 times the annual average expenditure between 2021–22 and 2024–25.
- Fund-limited approach: Sanctions and disbursals over Finance Commission cycle must not exceed approved outlay.
- Ministries can propose new schemes with lesser expenditure or seek trade-offs with existing ones.
Impact on Demand-Driven Schemes like MGNREGS
- Even MGNREGS, a flagship rural employment scheme, will face financial limits.
- Projected beneficiary numbers will cap the fund allocation for each Finance Commission cycle.
- Ministries must seek explicit approval to exceed the cap if beneficiary numbers increase unexpectedly.
Sectors Affected
- Wide-ranging schemes across:
- Social sectors: health, education, women and child development, tribal welfare
- Infrastructure: rural/urban development, water, sanitation
- Agriculture, environment, scientific research
Strategic Implications
- Promotes results-based budgeting and performance-linked funding.
- Encourages rationalisation of schemes and elimination of redundancies.
- Could cause social pushback if popular schemes face curtailment or stricter funding norms.
