Image Source : ANI/X Finance Minister Nirmala Sitharaman
Parliament Session: Finance Minister Nirmala Sitharaman on Tuesday said that the Indian economy is experiencing a “speedy rebound” from the 5.4 per cent growth recorded in the second quarter of the current fiscal. She added that the government will take necessary measures to ensure India remains the world’s fastest-growing economy.
While responding to discussions on the Union Budget for 2025-26 in the Lok Sabha, the Finance Minister said that the Budget focuses on increasing liquidity in people’s hands while ensuring fiscal prudence. She highlighted that 99 per cent of the borrowing in FY26 will be directed toward capital expenditure.
Indian economy is projected to grow at 6.4%
Sitharaman emphasised that inflation management remains the government’s top priority, with retail inflation staying within the 2-6% tolerance band. She noted that inflation, particularly in food prices, appears to be moderating.
On GDP growth, she highlighted that in the three years preceding 2024-25, India’s average growth rate was around 8 per cent. The Indian economy is projected to expand by 6.4 per cent in the current fiscal, marking the slowest pace in four years. The Finance Ministry’s Economic Survey forecasts growth for FY26 to range between 6.3-6.8 per cent.
Sitharaman pointed out that India’s growth rate fell to 5.4 per cent or below in only two out of the last 12 quarters. GDP growth in the second quarter (July-September) declined to a seven-quarter low of 5.4 per cent.
“… on account of strong economic foundation, a speedy rebound is happening, and we shall take measures which will going forward, help in keeping our economy growing fastest as in the last few years. We will continue to remain the fastest-growing economy,” the minister said.
Sitharaman said the private final consumption expenditure is expected to grow by 7.3 per cent in the current fiscal driven by a good rural demand.
The private final consumption expenditure is estimated to be 61.8 per cent of the nominal GDP, which is the highest since 2002-03, she added.
Sitharaman said the effective capital expenditure in FY’26 is Rs 15.48 lakh crore, which is 4.3 per cent of GDP. The Government is targeting a fiscal deficit of Rs 15.68 lakh crore, which is 4.4 per cent of the GDP in FY’26. Fiscal deficit is the difference between Government revenue and expenditure and the gap is met by market borrowings.
Govt using almost entire borrowings in FY’26 towards capex
Sitharaman said that the government is using almost the entire borrowing in 2025-26 towards financing capital expenditure. She said the effective capital expenditure in FY’26 is Rs 15.48 lakh crore, which is 4.3 per cent of GDP.
“… the government is using almost the entire borrowed resources for financing effective capital expenditure. So the borrowings are not going for revenue expenditure or committed expenditure, or any of those kinds. It’s going only for creating capital assets.
“So, in effect, the government intends to use about 99 per cent of borrowed resources to finance effective capital expenditure in the upcoming year,” she said in the Lok Sabha.
Sitharaman said the Budget has come in a time of immense uncertainties, changes in the global macro-economic environment, stagnating global growth and sticky inflation.
The world’s scenario in the last 10 years turned 180 degrees, and making Budget is more challenging now than ever before, she said, adding Budget balances national development necessities with fiscal priorities.
On weakening of rupee against the US dollar
The Finance Minister attributed the weakening of the rupee against the US dollar to various global and domestic factors.
She noted that the Indian rupee depreciated by 3.3 per cent against the US dollar between October 2024 and January 2025. However, this decline was lower compared to some Asian currencies, with the South Korean Won and Indonesian Rupiah depreciating by 8.1 per cent and 6.9 per cent, respectively.
Additionally, all G-10 currencies also saw depreciation of over 6 per cent during this period, with the Euro falling by 6.7 per cent and the British Pound by 7.2 per cent.
Sitharaman further clarified that there has been no reduction in fund transfers to states, and ₹25.01 lakh crore will be allocated to them in FY26.
(With PTI inputs)
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