NEW DELHI: The government has not reduced the allocation to capital expenditure, but instead has increased the effective capital expenditure by about 18% from Rs 13.18 lakh in the current fiscal to Rs 15.48 lakh crore in FY26, which is 4.3% of GDP, finance minister Nirmala Sitharaman said in parliament on Tuesday.
She was replying to the debate on Budget 2025 in Lok Sabha. Addressing the concern raised by many members over the shift in focus away from capex, the minister reiterated that capital outlay has not come down at all.
The finance minister also said that while the effective capital expenditure in FY26 is 4.3% of the GDP, 10 basis points lower than the budgeted fiscal deficit of 4.4%.
“The government intends to use about 99% of borrowed resources to finance effective capital expenditure in the upcoming year,” she said in the Lok Sabha.
She also highlighted the Narendra Modi government’s efforts to maintain fiscal prudence over the past 10 years and yet manage to achieve high economic growth. Comparing the present government’s efforts with that of UPA, the FM said that while the 2008-09 financial crisis left us among the fragile five economies, India has emerged stronger fiscally after once-in-a-century pandemic like Covid in 2020-21.
She also pointed out the efforts of the Modi government to maintain fiscal transparency by bringing off-budget borrowings of certain central government agencies like Food Corporation of India (FCI) on the government books.
Allaying the fears of states over transfers of resources from the Centre, the finance minister highlighted the fact that transfers to the states would cross Rs 25.01 lakh crore across all schemes in FY26, which is Rs 2 lakh crore more than revised estimate for the current financial year.
“Transfer of resources is growing by the year,” she reiterated by citing that transfers to states in 2020-21 was Rs 13.44 lakh crore, which has risen to Rs 25 lakh crore over five years. She expressed confidence that the Indian economy is seeing a “speedy rebound” from 5.4% growth clocked in the second quarter of the current fiscal.