State borrowings must focus on asset creation, not just revenue expenditure: FM Nirmala Sitharaman

Kancheepuram: Union Finance Minister Nirmala Sitharaman on Thursday emphasised that state governments must channel their borrowed funds into long-term capital expenditure, such as schools and hospitals, rather than relying heavily on revenue expenditure like cash distributions when financial resources are tight.

Addressing the media, Sitharaman underscored that taking loans to create public infrastructure yields a positive economic impact and generates employment for the next 50 to 60 years.

"Borrowing is not the issue, but what you do with the borrowed money matters. Are you creating assets? Is it bringing education, industries, or increasing employment? That should be the focus," she said, noting that states are permitted to borrow up to three per cent of their Gross State Domestic Product (GSDP).


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Sitharaman, who is on a two-day visit to Tamil Nadu and Puducherry, attended Maha Kumbabhishekam of Sri Upanishad Brahmendra Mutt in Kancheepuram on Thursday.

Later in the day, she is scheduled to travel to Puducherry to inaugurate a renovated colonial-era lighthouse at the Central Goods and Services Tax (CGST) Commissionerate campus. Her heritage conservation itinerary also includes the inauguration of the restored 400-year-old Muzhiankulam (historic pond) at a government middle school in Puducherry on Friday.

Responding to queries regarding the absence of a medical college in Kancheepuram, the Finance Minister clarified that the Centre had already announced a policy three budgets ago to support the establishment of a medical college and hospital in every district.

Sitharaman urged the Tamil Nadu government to submit a proposal. "We have told the states to plan for whichever district they want. The Tamil Nadu government should understand this and plan accordingly," she added.

Commenting on the delayed development of Andhra Pradesh's capital, Amaravati, the minister pointed out that political shifts had stalled progress.

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She noted that while the capital was being built continuously between 2014 and 2019, a subsequent change in the state government halted the project until 2024.

"In any such matter, all parties must come together and take a responsible decision to carry development forward," Sitharaman said.

When asked for her reaction to the current Chief Minister C Joseph Vijay narrating a 'short story' to criticise his predecessor during an ongoing state legislative assembly session, Sitharaman defended the democratic process.

"If political criticism is not done in the assembly, where else will it be done? Let the opposition answer and let the ruling party speak. There is nothing wrong with it," she stated.