ET Graphics: Borrowing now fuels growth as capital spending overtakes fiscal deficit

Union Budget 2026: Government borrowing is now funding capital expenditure. This indicates better spending quality and a stronger deficit. The effective capital spending exceeds the fiscal deficit. This means borrowing is creating assets that will...

By ET Bureau | Feb 02, 2026, 08.09 AM IST

India Budget 2026: The budget holds the fiscal position, but importantly, govt borrowing is now largely going into financing capex, as is evident in the effective revenue deficit estimated at 0.3% of GDP.

The effective capital spending—Centre’s and capital grant to states—at ₹17.1 lakh crore is more than the fiscal deficit of ₹16.96 lakh crore, indicating an improvement in quality of expenditure and the deficit.

Put simply, borrowing is going into asset creation that will boost the economy’s growth potential.