India's outstanding liabilities rose to Rs 201.17 lakh crore in FY26 (provisional), up 8% from Rs 185 lakh crore lakh in FY25, even as the Centre maintained that the country's public debt remains fiscally sustainable due to a declining debt-to-GDP ratio and rising government revenues that have helped meet increasing interest payment obligations.
Responding to a question in the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary said the debt-to-GDP ratio has been broadly on a declining trajectory since the Covid-19 pandemic, indicating fiscal sustainability of public debt. He added that increasing revenue receipts have enabled the government to service interest payment obligations in a fiscally sustainable manner.
Of the total Rs 201 lakh crore, public debt formed the overwhelming bulk of this, accounting for 91.2% of total liabilities at Rs 183.43 lakh crore. Within public debt, internal debt made up ₹173.55 lakh crore while external debt, valued at the current exchange rate, added a further Rs 9.89 lakh crore to public debt.
Data furnished by the Finance Ministry showed that interest payments increased steadily over the past five years, rising from Rs 8.05 lakh crore in FY22 to Rs 12.43 lakh crore in FY26.
The fiscal deficit, however, has moderated over the years. It stood at Rs 15.19 lakh crore in FY26 (provisional), compared with Rs 17.38 lakh crore in FY23 and Rs 15.85 lakh crore in FY22.
The government said it has adopted measures to effectively utilise available fiscal space by prioritising expenditure on socio-economic development and growth-inducing sectors. As a result, the share of effective capital expenditure in total expenditure has increased from 18.7 per cent in FY21 to 27.2 per cent in FY26.
For FY27, the government has budgeted effective capital expenditure of Rs 17.15 lakh crore, which is higher than the fiscal deficit estimate of Rs 16.96 lakh crore. According to the Finance Ministry, this reflects the government's focus on productive investment expenditure while maintaining the debt-to-GDP ratio at sustainable levels.
