Hike in govt capex, rising rural spending will accelerate growth: FM Sitharaman

New Delhi, Feb 11 (IANS) Union Finance Minister Nirmala Sitharaman on Tuesday said the Indian economy will continue to be the world’s fastest-growing economy backed by the increase in the government’s capital expenditure in the Budget for 2025-26 and rising consumption levels, especially in the rural areas.

In her reply to the Union Budget debate in the Lok Sabha, the Finance Minister said that the effective capital expenditure works out to 4.3 per cent of the GDP in the Budget for 2025-26 while the fiscal deficit is 4.4 per cent.

“This indicates that the government is using the entire borrowed resources for financing effective capital expenditure, creating capital assets,” she pointed out.

She cited figures from the Budget to show that the capex allocation in the budget has increased to Rs 1.21 lakh crore, dismissing the opposition’s claim that the outlay has been reduced.

The Finance Minister also said that inflation management is the highest priority of this government and overall retail inflation is within the notified tolerance band of 2 per cent to 6 per cent. She added that food inflation which was impacted by adverse weather conditions has all been attended to, and the government is continuing to do it.

Taking a dig at the Congress, she remarked, "Double-digit inflation rates under the earlier UPA regime is a thing of the past now."

FM Sitharaman pointed out that food inflation reached a staggering 11 per cent during the second term of the UPA-led government, causing serious hardship for the public.

Focus on supply chain improvement and agricultural progress helped the NDA government bring food inflation down to 5.3 per cent from 2014 to 2024, she said.

FM Sitharaman highlighted that the government is undertaking steps like monitoring groundwater levels so that there is no problem with the irrigation of either Rabi and Kharif crops, thus, keeping food inflation in check.

In this context, she also highlighted that the government had infused more capital to strengthen the FCI which procures agricultural goods from farmers at the MSP.

The Finance Minister also refuted claims that the government’s debt burden was increasing. She highlighted that the debt: GDP ratio has come down during the tenure of the Modi government and the target was to further lower it to 50 per cent by 2030-31. She also pointed out that only 3.4 per cent of the government debt was related to the external sector and the remaining 96.6 per cent was from domestic sources which reduced the downside risk.

FM Sitharaman also said that the unemployment rate has declined from 6 per cent in 2017-18 to 3.2 per cent in 2023-24.

She said that India is not alone when it comes to weakening currency. The dollar has been strengthening against currencies of several Asian countries, including Indonesia, Japan and South Korea, and currencies of European countries have also fallen against the dollar.

She further also targeted the earlier UPA government, saying that UPA-era oil, fertilizer and FCI bonds are being repaid now this year and next year. The interest on this itself is Rs 3524 crore in FY26, and the principal due is Rs 40,464 crore.

She also stated the Centre had not reduced the allocation to states. In fact, the states have not been able to spend as much as Rs 2,000 crore allocated under the health mission, she pointed out.

The Finance Minister said that unspent balances of 1 lakh crore rupees as of December 31, 2024, are still lying either in the SNA or escrow accounts of the states for various schemes and states are asking for more money when unspent balances are lying.

FM Sitharama also said that Rs 1395.45 crore is lying in SNA, treasury, and escrow accounts in states while Rs 4636.55 crore is lying in states' accounts for food security and for urban rejuvenation mission and Rs 12377 crore lying in states for the AMRUT scheme.

In the case of MGNREGA as much as Rs 4351 crore was still lying with states, she added.