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The government has projected total expenditure of INR 53.47 lakh crore for the next financial year, reflecting a 7.7 per cent rise over the current fiscal. Capital expenditure has been raised to a record INR 12.2 lakh crore, with effective capex reaching INR 17.1 lakh crore after including long-term state loans. The fiscal deficit is estimated at 4.3 per cent of GDP, while tax receipts are projected at INR 44.04 lakh crore. The Budget maintains focus on debt reduction, state funding, healthcare infrastructure, and support for farmers.
The Union government has outlined a total expenditure of INR 53.47 lakh crore for the next financial year, marking an increase of about 7.7 per cent compared to the ongoing fiscal that concludes at the end of March. The announcement was made by Finance Minister Nirmala Sitharaman during her response to the debate on the Union Budget in the Lok Sabha. Advertisement
As per the revised estimates, the size of the Budget for the current fiscal stands at INR 49.64 lakh crore, lower than the INR 50.65 lakh crore projected earlier. This follows total expenditure of INR 46.52 lakh crore in FY 2024-25, reflecting a steady year-on-year expansion in government spending.
For the upcoming fiscal, total expenditure is expected to remain significantly higher than tax receipts. The government has projected tax collections of INR 44.04 lakh crore, about 8 per cent higher than the previous year, indicating continued reliance on borrowing and other financing sources to bridge the gap.
Capital expenditure remains a key focus area, with the highest-ever allocation of INR 12.2 lakh crore. This amounts to 3.1 per cent of GDP and represents an increase of 11.5 per cent over the revised estimates for FY 2025-26. In addition, long-term interest-free loans to states under the Special Assistance to States for Capital Investment scheme have been increased to INR 2 lakh crore for a 50-year tenure, following recommendations from state finance ministers.
With these provisions, effective capital expenditure is estimated at INR 17.1 lakh crore, equivalent to about 4.4 per cent of GDP. The government has maintained that this level of investment is crucial for sustaining growth while strengthening public infrastructure.
On fiscal discipline, the fiscal deficit for FY 2026-27 has been projected at 4.3 per cent of GDP, or INR 16.95 lakh crore. To fund this deficit, net market borrowings through dated securities are estimated at INR 11.7 lakh crore, while gross market borrowings are pegged at INR 17.2 lakh crore. The remaining financing is expected to come from small savings and other instruments.
The Finance Minister reiterated the government's commitment to reducing the debt-to-GDP ratio under the Fiscal Responsibility and Budget Management framework. In Budget 2025-26, the Centre had indicated a medium-term target of bringing the debt-to-GDP ratio down to 50, with a margin of one percentage point, by 2030-31. In line with this path, the ratio is estimated at 55.6 per cent in FY 2026-27, compared to 56.1 per cent in the revised estimates for FY 2025-26. A gradual decline in debt levels is expected to ease interest payment pressures and free up resources for priority sectors.
Highlighting other Budget measures, Sitharaman said states can seek selection for five proposed regional medical hubs through PM Gati Shakti filters. These hubs are planned as integrated zones combining medical education and patient care, with dedicated institutions for nursing and 10 allied health services. Over time, the government expects these hubs to generate employment and also emerge as centres for medical tourism.
Addressing concerns around fertiliser availability, she stated that supplies are adequate and that the government has allocated INR 1.71 lakh crore for fertiliser imports to support farmers. On Centre state financial relations, she referred to the analysis by the 16th Finance Commission, which examined fund transfers between 2018-19 and 2022-23 and concluded that the Centre's devolution to states matched the Commission's recommendations each year.
She added that for FY 2026-27, states are expected to receive INR 25.44 lakh crore as their share, an increase of INR 2.7 lakh crore over the previous year. Apart from this, cess and surcharge collections are also passed on to states for development activities, over and above the 41 per cent devolution mandated by the Finance Commission.
During the discussion, Sitharaman also responded to opposition claims on foreign trade policy and internal governance issues, while reiterating that financial decisions taken by the Centre are guided by national interest and constitutional provisions.
Source PTI
FAQ
Q1. What is the government's total expenditure target for the next financial year?
The Union government has projected total expenditure of INR 53.47 lakh crore for the next financial year. This represents a 7.7 per cent increase over the current fiscal year's revised estimates. The rise reflects continued emphasis on growth-supportive spending while maintaining control over fiscal parameters.
Q2. How much has been allocated for capital expenditure, and why is it significant?
Capital expenditure has been raised to a record INR 12.2 lakh crore, accounting for about 3.1 per cent of GDP. This marks an 11.5 per cent increase over the revised estimates for FY 2025-26. Capital spending is viewed as critical for building infrastructure, supporting long-term growth, and crowding in private investment.
Q3. What is meant by effective capital expenditure,and how much is it estimated at
Effective capital expenditure includes the Centre's direct capex along with long-term interest-free loans provided to states for asset creation. For the coming fiscal, effective capex is estimated at INR 17.1 lakh crore, or around 4.4 per cent of GDP, reflecting strong support for infrastructure-led development across states.
Q4. What is the fiscal deficit projection for FY 2026-27?
The fiscal deficit for FY 2026-27 has been projected at 4.3 per cent of GDP, amounting to INR 16.95 lakh crore. This indicates a continued effort to balance growth-oriented spending with fiscal consolidation under the Fiscal Responsibility and Budget Management framework.
Q5. How does the Budget address debt reduction and borrowing requirements?
The government aims to gradually reduce the debt-to-GDP ratio to around 50 per cent by 2030-31. For FY 2026-27, the ratio is estimated at 55.6 per cent, down from 56.1 per cent in the previous year's revised estimates. Net market borrowings are projected at INR 11.7 lakh crore, with gross borrowings at INR 17.2 lakh crore.
Q6. What support does the Budget provide to states, healthcare, and farmers?
States are expected to receive INR 25.44 lakh crore as their share in FY 2026-27, an increase of INR 2.7 lakh crore over the previous year. The Budget also proposes five regional medical hubs under PM Gati Shakti to strengthen healthcare infrastructure. For agriculture, INR 1.71 lakh crore has been allocated for fertiliser imports to ensure adequate supply for farmers.
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