FM defends FY27 Budget, says capex push and higher state transfers to power growth

Finance Minister Nirmala Sitharaman on Wednesday defended the Union Budget for FY27 in the Lok Sabha, saying the government has prioritised capital expenditure and higher transfers to states to sustain growth while maintaining fiscal discipline.

Replying to the General Discussion, she said capital expenditure has been increased by 11.5% in FY27, with effective capex estimated at 4.4% of GDP, or about ₹17 lakh crore. She described public investment as a “force multiplier” that will help drive growth and support the government’s Viksit Bharat goal.

On the recommendation of state finance ministers, the Centre has raised the capital expenditure grant under the Special Assistance to States for Capital Investment (SASCI) scheme to ₹2 lakh crore. Sitharaman said several states have completed multiple infrastructure projects since 2021 under the scheme.

The fiscal deficit for FY27 has been pegged at 4.3% of GDP. She clarified that this target is not being met by restricting expenditure, but through improved revenue mobilisation and calibrated spending.

Gross tax receipts are projected to grow 8% in FY27, she said, adding that bank credit has expanded by 13%, indicating that there is no shortage of credit in the system.

Addressing concerns raised by opposition members, the Finance Minister said 41% of tax revenues are being devolved to states in line with the Finance Commission’s recommendations. She emphasised that devolution is calculated on gross tax receipts minus cess and surcharge, and not on total gross tax collections.

Over ₹25 lakh crore, including transfers under Centrally Sponsored Schemes, will be passed on to states in FY27, which she said is higher than the FY26 revised estimates and FY25 actuals. She also stated that cess collections are channelled into state development projects and are not used by the Centre alone.

On fiscal metrics, Sitharaman noted that the debt-to-GDP ratio is not a new target and was included in the amended FRBM Act in 2018 alongside fiscal deficit parameters.

Highlighting sector-specific measures, she said 10,000 new tourist guides will be trained to support 20,000 iconic tourist sites. An AI-driven multilingual tool, Bharat Vistaar, is also being rolled out to digitise agriculture and improve farm productivity in coordination with the Agriculture Ministry.