Govt to use 99% of borrowed funds for capital expenditure in 2025-26, says FM Sitharaman

Union Finance Minister Nirmala Sitharaman, while replying to the debate on the Union Budget in Lok Sabha today, said the government intends to use about 99% of borrowed resources to finance effective capital expenditure in the upcoming year (2025-26).

The Finance Minister pointed out that this year's Union Budget has allocated ₹1.71 lakh crore for agriculture, ₹2.67 lakh crore for rural development, ₹6.45 lakh crore for urban development and transport, ₹2.27 lakh crore for health and education, and ₹4.92 lakh crore for defence (which excludes defence pension). "Money is not being denied to any of the capital expenditure accounts," says the FM.

She says the effective capital expenditure of 4.3% and the fiscal deficit of 4.4% of the GDP for 2025-26 indicate that the central government is using all its borrowed resources to finance capital asset creation. The Union Budget 2024-25 has come at a time of immense "uncertainty", she says, adding that continuous changes in the global macroeconomic environment make it even more challenging.

The FM also highlights the challenges faced during Budget preparation, which were driven by significant uncertainties. She says these challenges are influenced by global concerns that directly impact India's budget-making process. The FM says the focus of this year's Union Budget has been on "the poor, youth, farmers, and women." The premise was to introduce new schemes and reforms to boost agriculture, MSMEs, and exports as engines of growth, she adds.

"There is a continuation of global conflict in the Middle East, Russia-Ukraine War continues stagnation in global GDP and sticky inflation in the emerging markets are all vitiate the atmosphere in the entire developing economies. We ideally have a situation which should encourage free trade, we are seeing no restriction, where we very strongly vouch for globalisation, we see lot more fragmentation, where we need fiscal prudence, we have seen rising debts," says the FM.

The FM says a major step has been taken to improve operational efficiency across ministries. "They had to come to us seeking permissions for small amounts. Ministries are more empowered now, so decisions regarding the dispersal of money are quicker."

She also talked about welfare schemes, saying before 2014, 45% of houses did not have LPG connections. "Now 35 crore houses, meaning 100% houses, have LPG connections. Over 10 crore beneficiaries get LPG cylinder at ₹503."