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‘Making budget more difficult than before; govt to use 99% borrowings in FY26 for capex’: FM Sitharaman
- FM Sitharaman said the effective capital expenditure in FY'26 is ₹15.48 lakh crore, which is 4.3 per cent of GDP. The fiscal deficit target is 4.4 per cent of the GDP for next fiscal.
Union finance minister Nirmala Sitharaman said on Tuesday, February 12, 2025, that the government will use almost all its borrowing in 2025-26 (FY26) to finance capital expenditure (capex). FM Sitharaman highlighted the effective capex in FY26 is ₹15.48 lakh crore, which is 4.3 per cent of the gross domestic product (GDP).
The fiscal deficit target for the next fiscal year is 4.4 per cent of the GDP. “It indicates that the government uses almost all the borrowed resources to finance effective capital expenditure. So, the borrowings are not going for revenue expenditure or committed expenditure, or any of those kinds.”
Also Read: India’s CAD to widen to 1.3% of GDP in FY26 on export headwinds from Trump’s trade policies: Crisil
“It's going only to create capital assets. So, in effect, the government intends to use about 99 per cent of borrowed sources to finance effective capital expenditure in the upcoming year," FM Sitharaman said in the Lok Sabha.
The difference between total revenue and government expenditure is the fiscal deficit. It indicates the total borrowings that the government may need. The capex outlay of ₹15.48 lakh crore for FY26 includes ₹11.21 lakh crore in direct central government spending and ₹4.27 lakh crore in state grants for capital projects.
FM Sitharaman on Budget 2025
Responding to a discussion on the Union Budget 2025-26, FM Sitharaman said the Budget has come at a time of immense uncertainties, changes in the global macro-economic environment, stagnating global growth, and sticky inflation.
The world's scenario in the last 10 years turned 180 degrees, and making Budget is more challenging now than ever before, she said, adding that the Budget balances national development necessities with fiscal priorities
FM Sitharaman said the inflation trend, particularly regarding food, appears moderate. "Inflation management receives the highest priority of this government. Overall, retail inflation is within the notified tolerance band of 2-6 per cent," said FM Sitharaman.
FM Sitharaman said global and domestic factors influence the rupee's weakening against the US dollar. Between October 2024 and January 2025, the rupee depreciated 3.3 per cent against the US dollar, but the decline was lower than that of some of its Asian peers. South Korean Won and Indonesian Rupiah depreciated by 8.1 per cent and 6.9 per cent, respectively, in this period.
Further, all G-10 currencies depreciated by more than six per cent during this period, with the Euro and British Pound depreciating by 6.7 per cent and 7.2 per cent, respectively. FMSitharaman also said there has been no cut in transfer to states, and ₹25.01 lakh crore will be transferred in FY'26.
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Business NewsEconomy‘Making budget more difficult than before; govt to use 99% borrowings in FY26 for capex’: FM Sitharaman
First Published:11 Feb 2025, 06:58 PM IST
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