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

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.