Incremental Budgeting: Small Changes for Political Feasibility

Every year, when the Union Finance Minister walks into Parliament on February 1st with the Budget, we expect bold announcements and dramatic shifts. Yet if you actually compare two consecutive budget documents, something curious emerges. Most allocations look remarkably similar to the previous year, with modest bumps here and slight trims there. This is not a failure of imagination. It is the working of a powerful theoretical idea called the incremental approach to budgeting, one that explains why governments rarely redesign their finances from scratch, and why political feasibility often matters more than technical perfection.

The origins of incrementalism 🔗

The incremental approach to budgeting is closely tied to American political scientist Charles E. Lindblom, whose 1959 essay “The Science of Muddling Through” fundamentally changed how scholars think about public decision-making. Lindblom developed incrementalism in the 1950s as a response to the then-dominant view of policy making as a process of rational analysis leading to a value-maximizing decision. In his view, the “rational-comprehensive” ideal, which assumes decision-makers can weigh every alternative and choose the optimal one, was simply unachievable in real political settings.

Lindblom argued that rather than comparing all possible alternatives, decision-makers restrict comparisons to marginal changes in existing policy, and the test of a good policy is simply the ability to make a decision. His theoretical foundation was later extended to budgeting specifically by Aaron Wildavsky in his 1964 book The Politics of the Budgetary Process, where Wildavsky showed that budget outcomes are cobbled together and vary only slightly over time.

What “muddling through” really means 🔗

The phrase “muddling through” can sound dismissive, but Lindblom used it seriously. He argued that policymakers do not start with a blank slate. They begin with the existing policy and make limited, cautious adjustments, comparing only a small number of alternatives that differ slightly from what already exists. The reasoning is practical. Governments face cognitive limits, information shortages, and deep disagreements over values. Asking officials to optimize everything at once is a fantasy. Making small, reversible changes is the real science of getting things done.

How incremental budgeting actually works 🔗

In concrete terms, incremental budgeting treats the previous year’s budget as the “base” and focuses the entire budgetary conversation on adjustments to that base. The current budget is used as a base to which incremental assumptions are added or subtracted to determine new budget amounts. Officials do not sit down and ask, “Should the Ministry of Education exist? How much should it ideally get?” They ask, “By how much should the ministry’s allocation go up or down compared to last year?”

This seemingly small shift has enormous implications. It narrows the scope of debate, lowers the political temperature, and makes the entire exercise finishable within a finite calendar. Consider the Union Budget process. The budget-making process starts in August or September, about six months before its presentation, with the Ministry of Finance issuing a circular to all ministries, states, Union Territories, and autonomous bodies asking them to prepare estimates for the coming year. Each ministry submits three sets of figures: budget estimates for the next year, revised estimates for the current year, and provisional actuals for the previous year. The entire architecture assumes continuity, not rupture.

The base, the increment, and the negotiation 🔗

The “base” in incremental budgeting is rarely questioned. It is treated as settled territory. What gets negotiated is the increment, whether a department gets 8 percent more, 3 percent less, or something in between. This is why debates in Parliament often revolve around whether MGNREGA should get, say, ₹86,000 crores instead of ₹73,000 crores, rather than whether MGNREGA should exist in its current form at all. The base commands presumptive legitimacy simply because it already exists.

Why political feasibility is the heart of the approach 🔗

Lindblom’s most important insight was that budgeting is not just a financial exercise. It is a political one. Every rupee in a budget represents someone’s claim, someone’s livelihood, someone’s political constituency. Trying to reallocate resources dramatically triggers resistance from every stakeholder who stands to lose. Small adjustments, by contrast, are politically digestible.

This is why incremental budgeting thrives in democracies with competing interests and coalition governments. In India’s multi-party federal system, large sudden shifts in budget allocations could destabilize coalitions, antagonize state governments, and provoke protests from affected groups. Incremental changes allow the government to adjust course without triggering these landmines. When spending changes are marginal, the winners do not celebrate too loudly and the losers do not mobilize too fiercely.

Conflict avoidance as a design feature 🔗

Incrementalism is often criticized for being timid, but its defenders argue that this timidity is exactly what makes democratic budgeting possible. By keeping changes small, conflicts between departments with different budgets become easier to manage, and everyone stays on the same page. In a system where finance ministries must negotiate with dozens of line ministries, regulatory bodies, state governments, and political stakeholders, the incremental approach essentially lubricates the process.

Lindblom called his refined model disjointed incrementalism, acknowledging that in large, complex governments there is no single coordinating mind behind policy. Different agencies work on overlapping problems without fully aligning their efforts, and this fragmentation is not a bug but a feature of pluralistic politics.

Key characteristics of the incremental approach 🔗

Several traits define this model of budgeting:

Limited scope of change: Instead of examining every rupee, decision-makers focus only on proposed changes to existing programs. The bulk of the budget is accepted as given.

Marginal analysis: Comparisons are made between the status quo and a small handful of close alternatives, not between every conceivable option.

Bounded rationality: This approach reflects what is often called bounded rationality, the idea that decision-makers operate within constraints of time, information, and political feasibility, settling for satisfactory solutions rather than optimal ones.

Trial-and-error learning: Policies are treated as experiments. Because changes are small, mistakes are small too, and they can be reversed without catastrophic consequences.

Continuity and predictability: Departments can plan multi-year operations knowing that their funding will not vanish overnight. This is particularly important for long-gestation infrastructure and welfare programs that span multiple budget cycles.

Advantages that keep incrementalism in practice 🔗

Despite decades of criticism, the incremental approach endures because it solves real problems. It is the simplest and most traditional form of budgeting, requires less effort and time, and can be carried out by people with minimal expertise because the previous budget already supplies the figures on which a new budget can be built. For a finance ministry juggling hundreds of demands within a tight timeline, this efficiency is not a small benefit.

The approach also supports institutional memory. Civil servants can focus on improving existing programs rather than constantly defending their existence. Long-term development projects, whether highways, metro systems, or rural electrification schemes, depend on predictable funding streams that incremental budgeting provides. Sudden overhauls would disrupt implementation and waste sunk investments.

Simplicity in a complex federation 🔗

India’s fiscal federalism involves the Union government, twenty-eight states, and several Union Territories, each with their own priorities. Layered on top are Centrally Sponsored Schemes, Finance Commission transfers, and GST compensation arrangements. Trying to rationally redesign this web from scratch each year would be administratively impossible. Incrementalism lets the system continue running while adjustments happen at the edges.

The critiques of incrementalism 🔗

Incrementalism has its critics, and their concerns are serious. One major limitation is the tendency to perpetuate inefficiency, because the approach assumes previous spending was justified; if departments engaged in wasteful practices, the new budget will continue to support those same activities. The base itself is never examined, so errors and inefficiencies simply carry forward year after year.

There is also the notorious “use it or lose it” problem. Departments learn that unspent allocations signal that they did not need the money, which may reduce next year’s increment. This creates an incentive to spend every last rupee before the fiscal year ends, often on low-priority purchases, just to protect future budgets. Anyone familiar with March-end spending sprees in government offices has seen this dynamic in action.

The beagle fallacy and missed opportunities 🔗

Critics also point to what is sometimes called the “beagle fallacy.” A beagle has an excellent sense of smell but poor eyesight, so it can miss prey that stands right in front of it. Similarly, by focusing only on small adjustments, organizations may miss larger shifts in the policy environment. New challenges like climate change, digital transformation, or demographic transitions may require bold rather than incremental responses, and incrementalism can be dangerously slow to adapt.

This is why alternative approaches such as zero-based budgeting, programme budgeting, and performance-based budgeting have periodically been proposed in India and elsewhere. Each promises more rigor and fewer entrenched inefficiencies. Yet, as Wildavsky observed, reforms that try to introduce comprehensive rationality into appropriations processes, whether Johnson’s planning-programming-budgeting system in the United States or Jimmy Carter’s zero-based budgeting, tend to fail in practice. The political logic of incrementalism keeps pulling budgets back to the familiar rhythm.

Incrementalism in the Indian context 🔗

In India, the incremental pattern is visible almost everywhere. Defence pensions, interest payments, salaries of government employees, and subsidies for food, fertilisers, and fuel together form a large, sticky core of Union government expenditure that shifts only marginally from year to year. Even flagship schemes tend to grow or shrink by percentages rather than being redesigned. Central capital expenditure, for example, may be pegged at around 3.2 percent of GDP for FY27, only slightly higher than 3.1 percent in the current year, as the government balances investment with fiscal stability.

The pre-Budget consultation process itself reinforces incrementalism. The Finance Minister meets farmer groups, industry associations, bankers, economists, and state representatives. Each of them lobbies for adjustments to existing arrangements, not for wholesale reinvention. The political economy of these consultations is inherently incremental. Nobody shows up asking for their sector to be abolished and rebuilt from zero.

When incrementalism breaks down 🔗

Incrementalism is not universal. Major crises, such as the 1991 balance of payments emergency, can force governments into non-incremental reforms. The economic liberalization that followed was anything but gradual. Similarly, the shift to GST in 2017 represented a fundamental redesign of indirect taxation. These departures from incrementalism happen, but they are rare and typically follow moments when the existing arrangement becomes clearly unsustainable. Under normal conditions, the political cost of bold reform is simply too high.

Why the approach continues to matter 🔗

Understanding incrementalism is essential for anyone studying public administration or preparing for civil services. It explains why ambitious reform agendas often produce modest actual changes, why the budget document tends to look more evolutionary than revolutionary, and why reforming the budgetary process itself is so difficult. It also offers a realistic vocabulary for discussing what governments can and cannot do, cutting through both utopian reform proposals and cynical dismissals of government action.

Lindblom’s genius was to describe budgeting honestly rather than prescriptively. He did not argue that incrementalism is the best possible system. He argued that it is the system we actually have, and that it reflects deep features of democratic politics, human cognition, and institutional complexity. Recognizing this does not mean accepting the status quo. It means understanding the terrain on which any real reform must operate.

What do you think? If incremental budgeting makes political sense but perpetuates inefficiencies, how should governments decide when to stick with small changes and when to attempt bolder reforms? And in an age of rapid technological and environmental change, is the “muddling through” approach still adequate, or does India need a more ambitious rethink of how its budget is designed?

References

1. https://www.britannica.com/topic/incrementalism
2. https://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/incrementalism
3. https://corporatefinanceinstitute.com/resources/fpa/incremental-budgeting/
4. https://www.indiainfoline.com/knowledge-center/union-budget/who-prepares-the-budget-and-the-steps-involved
5. https://en.wikipedia.org/wiki/Incrementalism
6. https://polsci.institute/public-policy-administration-india/incremental-budgeting-stability-predictability/
7. https://www.wallstreetoasis.com/resources/skills/finance/incremental-budgeting
8. https://www.cubesoftware.com/blog/incremental-budgeting
9. https://www.outlookbusiness.com/budget/how-indias-union-budget-is-prepared-and-passed-in-parliament-explained