NEW DELHI: The Finance Minister Nirmala Sitharaman said that the government is using nearly 99 per cent of its borrowings in FY26 to finance effective capital expenditure.
She stated that the effective capital expenditure for FY26 is Rs15.48 lakh crore, representing 4.3 per cent of GDP, while the fiscal deficit target for the next fiscal is set at 4.4 per cent of GDP.
According to Sitharaman, this approach means that almost the entire borrowed resource will be allocated to creating capital assets rather than funding revenue or committed expenditure.
Speaking in the Lok Sabha on the General Budget 2025-26, Sitharaman acknowledged that the Budget comes at a time of immense uncertainty amid shifts in the global macroeconomic environment, stagnating global growth and sticky inflation.
She stressed that inflation management remains the highest priority for the government, noting that overall retail inflation is within the notified tolerance band of 2-6 per cent and that food inflation appears to be moderating.
On the subject of the rupee’s depreciation against the US dollar, Sitharaman attributed the trend to various global and domestic factors.
Rupee depreciated 3.3% since Oct
The Indian rupee depreciated 3.3 per cent against the US dollar between October 2024 and January 2025 – a decline lower than that experienced by some of its Asian peers.
For example, during the same period, the South Korean Won and Indonesian Rupiah depreciated by 8.1 per cent and 6.9 per cent respectively, while all G-10 currencies fell by more than 6 per cent, with the Euro and British Pound dropping by 6.7 per cent and 7.2 per cent respectively.
Sitharaman also mentioned that there has been no cut in transfers to states, with Rs25.01 lakh crore set to be transferred in FY26.
Furthermore, she pointed out that the previous indirect tax regime of 15.8 per cent has now been reduced to 11.3 per cent under GST.
