On Tuesday, Finance Minister Nirmala Sitharaman firmly responded to former Finance Minister P. Chidambaram's criticism regarding capital expenditure (capex), stating that there has been no reduction in the central government's capex. Sitharaman explained that the actual release under the Scheme for Special Assistance to States for Capital Investment (SASCI) in FY25 is now close to the budgeted Rs 1.5 lakh crore, exceeding the revised estimate of Rs 1.25 lakh crore.
No Cuts, Only Standard Revisions
Addressing the media, Sitharaman said the accusations of a Rs 92,682 crore cut were "misleading" and based on "flawed comparisons." She highlighted that the Budget Estimates (BE), prepared before the start of the financial year, naturally evolve into Revised Estimates (RE) during the year, taking into account factors such as expenditure trends and emerging priorities. This is a standard practice in public finance, she emphasized.
The Finance Minister further explained that capital expenditure in FY24-25 had been affected by factors such as the Model Code of Conduct during elections, extreme weather events, and lower-than-expected spending by some states and central agencies. Additionally, many states failed to submit utilisation certificates, which impacted further fund releases. Sitharaman clarified that these revisions were not due to fiscal constraints.
Year-on-Year Increase in Capital Expenditure
FM Sitharaman pointed out that, despite the revisions, the capital expenditure has increased year-on-year. In FY24-25, the Budget Estimates for capital expenditure stood at Rs 11.11 lakh crore, a rise of 11.11% from the previous year's Rs 10.01 lakh crore. The revised estimate for FY 24-25 is Rs 10.18 lakh crore, which shows an increase of 7.3% compared to FY23-24.
Since 2021, the central government's capital expenditure outlays have seen exponential growth, rising from Rs 4.12 lakh crore in FY21 to an expected Rs 11.2 lakh crore in FY26. The Finance Minister also noted that the actual releases for SASCI in FY25, as of March 26, 2025, stood at Rs 1.46 lakh crore-well above the revised estimate of Rs 1.25 lakh crore, disproving the claims of cuts.
Addressing Political Criticism
Sitharaman criticized Chidambaram's selective use of arithmetic and comparisons, which, she argued, only served political rhetoric. She reiterated that the government's fiscal approach is marked by transparency and fiscal prudence, factors that were often overlooked during Chidambaram's tenure. She concluded by saying that the government remains committed to its fiscal management approach, which reflects ground realities and evolving priorities, rather than political posturing.
Conclusion
The Finance Minister's response highlights the ongoing debate surrounding fiscal management and capital expenditure. While political figures may engage in critiques, Sitharaman's defense emphasizes the importance of context in understanding budget revisions, and the central government's commitment to maintaining fiscal discipline in a challenging economic environment.
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