Finance Minister Nirmala Sitharaman said on Thursday that the government's capital spending since the Covid crisis has boosted confidence among private investors. The increased public expenditure has encouraged businesses to take risks and invest in growth.
Sitharaman reminded that every country needs public debt to manage finances, but it must be used wisely. She urged states to borrow only what they can repay and not to leave debt for future generations.
The minister highlighted that the confidence in the economy has led private firms to invest, benefiting overall growth. She spoke at the C D Deshmukh Lecture 2026.
The FY27 Budget will raise capital expenditure to ₹12.22 lakh crore, up from ₹3.39 lakh crore in FY20. This jump shows the government's commitment to asset creation.
Sitharaman said borrowing for asset creation brings rewards for both the government and the public. She stressed that spending should create productive assets.
In the 2024-25 Budget, she announced a plan to keep the fiscal deficit each year so that the central debt falls as a share of GDP. The debt‑to‑GDP ratio is projected at 55.6% for FY27, down from 56.1% in FY26.
The goal is to reduce the ratio to 50% by March 2031. The fiscal deficit for FY27 is targeted at 4.3% of GDP, or ₹16.96 lakh crore, with a net borrowing of ₹11.73 lakh crore after servicing past loans.
Sitharaman warned that borrowing must be purposeful, with clear timing and purpose. She said many states have approached the Centre to restructure debt and reduce interest costs.
She emphasized that states must be accountable and cannot ignore debt. Strong states should be supported, while lagging ones need to be pulled up.
The minister concluded that a robust Centre is needed to support defence, export, and manufacturing policies, and to ensure investments and policies are well managed.