Articles
As India awaits the Union Budget 2026–27, the country’s rural development strategy faces a familiar but unresolved choice. Each budget reaffirms the government’s commitment to livelihoods, women-led development, and inclusive growth in rural areas. Yet, one critical enabler of all three—rural mobility—continues to receive marginal attention in budgetary allocations.
Over the past two decades, successive budgets have prioritised investments in rural road construction. The assumption has been simple: build roads, and mobility will follow. While this approach has transformed physical connectivity across villages, it failed to ask some critical questions: how do people actually move on these roads, and at what cost?
The reality on the ground makes it evident that while roads exist, affordable and reliable transport services do not, forcing rural households to opt for costlier modes of transport. This is not just a planning gap but also a budgetary blind spot.
Budgets That Built Roads, Not Mobility
The Pradhan Mantri Gram Sadak Yojana (PMGSY) has been one of the most generously funded rural programmes in recent years. Cumulatively, the scheme has received public investment of approximately ₹4 lakh crore, connecting more than 1.62 lakh rural habitations. The Union Budget 2025–26 reinforced this trajectory with an allocation of ₹19,000 crore, and PMGSY-IV promises to connect an additional 25,000 unconnected habitations over the coming years.
While budgetary allocations for rural roads have risen steadily, allocations for rural transport services have remained negligible. Over the past decade, rural road length expanded by 92%, but the number of buses operating in rural areas increased by only 8% (CPPR 2026).
Rural roads today account for more than 70% of India’s road network, but rural mobility is treated as optional or residual.
The outcome is predictable: roads get built, but people still struggle to move.
Fiscal Impact on Rural Households
With physical connectivity ensured, the absence of adequate public transport does not eliminate travel needs; it simply elevates the expenditure of rural households. The share of conveyance expenditure in rural households has increased from 3.4% in 2010 to nearly 7.6% in 2024 (MoSPI 2024). In several states, conveyance now absorbs a significant share of household expenditure, signalling a growing mobility burden.
At the same time, vehicle ownership among rural households has risen from 4% in 2011 to 35.6% in 2023, driven largely by two-wheeler ownership. While often interpreted as a sign of rising prosperity, this trend frequently reflects compulsion rather than choice. In the absence of reliable public transport, households are forced to invest in personal vehicles, often through loans. Women, older persons, and poorer households remain the least served—precisely the groups most dependent on affordable public transport.
When budgets turn a blind eye to rural mobility, the burden finds its way to rural households.
AGEY: Minimal Allocation, Disproportionate Impact
The Aajeevika Grameen Express Yojana (AGEY) is the only budget-supported initiative that directly addresses rural transport services. This sub-scheme of the DAY-NRLM finances rural residents to become transport entrepreneurs, improving mobility while creating non-farm livelihoods, particularly for women’s self-help groups.
Despite its relevance, budget allocation for AGEY is strikingly small. Since its launch, total financial support for the scheme amounts to approximately ₹127.5 crore, enabling the development of just 2,297 vehicles across 25 states (Lok Sabha 2025). By contrast, annual allocations for PMGSY alone exceed ₹19,000 crore, underscoring the limited fiscal priority accorded to rural transport services.
For a scheme that receives barely a fraction of rural infrastructure spending, AGEY delivers returns that most larger programmes struggle to match. The scheme has improved access to healthcare and markets, reduced travel time and costs, and enabled women to operate transport services as viable enterprises (NIRD&PR 2022). It created alternative income opportunities, particularly for women, enabling them not only to operate transport services but also, in many cases, to take on driving roles, marking a visible shift in gender norms within rural communities. These outcomes directly support labour market participation, local economic activity, and women’s empowerment, all of which are the key objectives repeatedly emphasised in Budget speeches.
Now, the issue is not effectiveness but scale, and scale is ultimately a budget decision.
What the Budget Gets Wrong
India’s Budget framework treats rural roads as productive capital assets, while transport services are often classified as welfare expenditure. This accounting distinction has shaped decades of skewed investment: roads receive assured funding, whereas transport services are expected to survive on minimal allocations or cross-subsidies. This approach ignores a basic economic reality: roads without transport services do not generate full returns. In the absence of affordable buses or shared mobility options, infrastructure investments disproportionately benefit households with private vehicles, leaving others effectively disconnected.
If rural mobility were treated as economic infrastructure—on par with roads or electricity—budgetary priorities would look very different.
The Price of Downgrading Rural Mobility
The dilution of rural transport in budget priorities is also institutional. AGEY was a replacement for the Pradhan Mantri Gram Parivahan Yojana, a standalone rural transport scheme announced in 2016. While the objectives remained similar, the shift to a sub-scheme under DAY-NRLM reduced visibility, funding ambition, and policy ownership.
As a result, rural transport today falls between ministries, is weakly regulated, and is absent from major budget announcements. Regulatory gaps compound the problem. Although AGEY is designed for shared services, permit frameworks often restrict vehicles to contract carriage operations, undermining financial viability. As states now have flexibility under the Motor Vehicles Act (Amendment 2019) to design shared mobility permits, budget documents could signal a coordinated push in this direction.
What the Union Budget Must Do
If the Union Budget 2026–27 is serious about inclusive growth, fiscal corrections are essential.
First, rural mobility must be elevated as a budget priority and funded accordingly. Scaling up allocations for AGEY by treating mobility on par with road construction could expand it into a meaningful national programme that supports shared transport across underserved rural blocks. Alternatively, reviving the Pradhan Mantri Gram Parivahan Yojana or launching a new national rural mobility mission would send a clear fiscal signal that transport services are not ancillary but foundational to rural development.
Second, funding must be paired with enabling frameworks. Budget announcements should explicitly encourage states to use their regulatory powers to support shared rural transport services, ensuring that public spending translates into affordable and usable mobility on the ground.
What is striking is not the absence of solutions, but how consistently rural mobility slips through budget priorities.
From Capital Spending to Real Access
India has shown that sustained budgetary support can transform rural infrastructure. But infrastructure alone does not guarantee access. Without adequate funding for transport services, rural mobility remains constrained, costly, and unequal.
The roads are already built. What is missing is the everyday transport that makes those roads usable for ordinary rural households. As we are about to announce the Union Budget 2026–27, the question is no longer whether India can afford to invest in rural mobility, but whether it can afford not to.
The article was originally published in Mathrubhumi English.
Nikhil Ali, Senior Research Associate, Urban Research, at the Centre for Public Policy Research (CPPR), Kochi, Kerala, India.
Views expressed by the authors are personal and need not reflect or represent the views of the Centre for Public Policy Research (CPPR).
Nikhil Ali is an Associate, Research at the Centre for Public Policy Research. He completed his graduation in Civil Engineering from Sree Narayana College of Engineering and is a seasoned Civil Engineer with working experience at Tata Realty and Infrastructure Ltd. With a passion for urban planning, he acquired his master's degree in Urban Planning from Hindustan Institute of Technology and Science, Chennai. His expertise lies in Urban Mobility, land use planning/analysis, and water-sensitive planning.
