Finance Minister Nirmala Sitharaman has said the government's sustained capital expenditure push over the years has encouraged private sector investment, with companies now taking on greater risks to capitalise on India's growth momentum. She said public debt is a necessary tool for governments to manage finances, but stressed that states should borrow only to the extent they can comfortably service the debt, with funds directed towards asset creation instead of passing liabilities on to next generations.
The FY27 Budget has increased capital expenditure to Rs 12.22 lakh crore, up substantially from Rs 3.39 lakh crore in FY20. In the Budget for 2024-25, Sitharaman first announced that FY27 onwards, the government will endeavour to keep the fiscal deficit each year such that the central government debt will be on a declining path as a percentage of GDP. Consequently, in the FY27 Budget, the government estimated the debt-to-GDP ratio for the current fiscal year at 55.6 per cent of GDP, lower than 56.1 per cent of GDP for FY26. The government is looking to cut its debt-to-GDP ratio to 50 per cent by March 2031.
The Centre has set a gross borrowing target of Rs 16.09 lakh crore for FY27, and a net borrowing of Rs 11.73 lakh crore after repaying past loans and borrowing through treasury bills. Sitharaman said many states have come to the Centre with the proposal to restructure their debts and lower their interest burden. She said states will have to be strong and states have to be helped, but laggard states will have to be pulled up.
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