The Indian government’s record capital expenditure and strategic debt management aim to boost private sector confidence, foster infrastructure-led growth, and maintain fiscal discipline amid global uncertainties.
Finance Minister Nirmala Sitharaman said the Centre’s sharp increase in capital spending since the pandemic has helped revive private-sector confidence and nudged businesses to take on more risk. Speaking at the C D Deshmukh Lecture 2026, she argued that years of public investment in infrastructure and other assets have begun to pay off by encouraging companies to invest alongside the government.
The FY27 Union Budget lifts capital expenditure to ₹12.22 lakh crore, up from ₹3.39 lakh crore in FY20, according to the budget documents cited by PTI and other reports. Livemint reported that the government is treating this as part of a broader push for infrastructure-led growth at a time when private investment remains cautious amid global uncertainty. India Brand Equity Foundation said the budget also proposes an Infrastructure Risk Guarantee Fund to support private participation in such projects.
Sitharaman said the point of borrowing should be asset creation, not consumption, and stressed that public debt can be justified only when it helps build productive capacity. She added that the government wants central debt to follow a declining path as a share of gross domestic product from FY27 onwards. The FY27 Budget estimates the debt-to-GDP ratio at 55.6% for the current fiscal year, down from 56.1% in FY26, with a target of 50% by March 2031.
The budget projects a fiscal deficit of 4.3% of GDP, or ₹16.96 lakh crore, for FY27, although the figure rises to 4.5% when adjusted for the new nominal GDP series based on FY23 prices, according to the materials cited in the reports. Gross borrowing is set at ₹16.09 lakh crore, with net borrowing at ₹11.73 lakh crore after repayments and treasury bill funding.
Sitharaman also turned to the finances of India’s states, saying they must borrow prudently and keep debt linked to asset creation. She said several state governments have approached the Centre seeking debt restructuring to reduce interest costs. PolicyCircle has reported that state market borrowings now make up a larger share of fiscal deficits, while recent data cited by LiveMint and the Reserve Bank of India show state liabilities remain elevated, underscoring the strain on subnational finances.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
