Capex push, fiscal discipline hasn’t come at the cost of social spending cut: Sitharaman

New Delhi: Finance minister Nirmala Sitharaman on Tuesday said the government’s push for capital expenditure (capex), while maintaining fiscal discipline, has not come at the cost of public spending, emphasizing that allocations for social welfare and education have increased significantly.

Speaking at the Rajya Sabha, Sitharaman said the effective capital expenditure for the next fiscal year, 2025-26, is projected to be at ₹15.48 trillion, against ₹13.18 trillion in the ongoing fiscal, which includes core capital outlays in the Union Budget, and grants and aid allocated to states for creating capital assets.

"But all this is being done without reducing social welfare measures," she said adding allocations towards social welfare projects have increased from ₹56,501 crore in 2024-25 to ₹60,052 crore in 2025-26, and education allocations increased from ₹1.26 trillion to ₹1.29 trillion during the same period.

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India's capital expenditure (Capex) target stands at  ₹11.21 trillion, according to the budget estimates for 2025-26, compared to the budget estimates of   ₹11.11 trillion in the previous year.

The central government has also proposed to achieve a fiscal deficit target of 4.4% of India’s gross domestic product for 2025-26, highlighting its commitment to fiscal discipline.

The Centre is on track to achieving a fiscal deficit of 4.8% of GDP in 2024-25, with a further reduction to 4.4% targeted for 2025-26, finance minister Nirmala Sitharaman announced in her budget speech in February.

This revised estimate marks an improvement from the earlier target of 4.9% for 2024-25.

Fiscal deficit is the shortfall between a government’s income and expenditure and is expressed as a percentage of GDP.

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Meanwhile, countering claims of stagnant employee compensation, Sitharaman cited national accounts statistics to highlight that employee compensation at current prices grew at a compound annual growth rate of 11.1% between 2014-15 and 2022-23, during the first decade of the NDA government.

Sitharaman said that India's household debt remains relatively low compared with both other emerging market economies and several developed nations.

“Household debt, including loans and debt securities, stands at 39% of GDP in India, compared to 35% in Brazil. However, in other comparable countries, the figures are much higher—Malaysia at 69%, Greece at 42%, Hong Kong at 93%, and Australia at 110%. Some are portraying India’s household debt as alarmingly high, but I’m sorry, they are mistaken,” Sitharaman said.

“I want to inform this House that India’s household assets and liability figures are far stronger than those of many comparable emerging market economies,” she said.

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She added that consumption inequality in rural and urban areas has declined significantly, as reflected by the significant improvement in the Gini coefficient, a key measure of income inequality.

Sitharaman also defended her government's 'Make in India' initiative stating it has given great momentum for manufacturing in the country.

"India's manufacturing sector has faced significant challenges due to external factors...Making in India has made the defence (sector) become a net exporter," she said.

Sitharaman highlighted that the government’s Production Linked Incentive (PLI) scheme has attracted investments of over ₹1.5 trillion, generated employment for more than 950,000 people, and boosted exports beyond ₹4 trillion.

Meanwhile, answering questions from the opposition, Sitharaman said public sector banks have recovered a total of ₹2.27 trillion in written-off loans so far, while private sector banks had clawed by NPAs worth ₹55,598 crore.

"Written-off loans do not mean the loans have been waived," she said adding public sector banks are taking all recourses to get their money back from defaulters.

And read | Centre weighs easing conditions for interest-free capex loans to states