Finance Minister Nirmala Sitharaman said India’s capital expenditure has not been cut but will, in fact, rise to Rs 11.21 lakh crore for the 2025-26 fiscal year, marking an increase from Rs 11.11 lakh crore in 2024-25. This announcement was made during the Question Hour in the Rajya Sabha. 

Sitharaman emphasised, “Actually, (in) the budget this year, it has gone up to Rs 11.21 lakh crore. So, the capital expenditure has not been cut at all,” countering concerns about budget reductions. Loans to states under the interest-free 50-year special assistance scheme for capital expenditure have also increased proportionately, she further explained.

Sitharaman was responding to a question from former finance minister P Chidambaram, who asked why the revised budget estimates for FY 2024-25 showed a decrease in capital expenditure to Rs 10,18,429 crore from Rs 11.11 lakh crore and a reduction in special assistance to states to Rs 2,99,891 crore from the earlier estimate of Rs 3,90,778 crore. 

Addressing these discrepancies, Sitharaman reiterated, “So, cutting down the capital expenditure is not the case with us.” The special assistance scheme, initiated in 2020-21, has consistently seen increments in loan disbursements.

Since its inception, the special assistance scheme has approved significant funds for states, although actual releases have varied. In 2020-21, while Rs 9,912 crore was approved, Rs 11,830 crore was disbursed. Over subsequent years, approved amounts have increased with Rs 15,928 crore in 2021-22, Rs 95,147 crore in 2022-23, and Rs 1,27,492 crore in 2023-24. Disbursements during these years were Rs 14,186 crore, Rs 81,195 crore, and Rs 1,00,954 crore, respectively. By March 26 of the current fiscal year, Rs 1,46,362 crore had been released against an approval of Rs 1,53,673 crore.

The Finance Minister acknowledged a lag in monitoring fund allocation by the states, stating, “Not that instant when the money is sent, I would not know whether it is used for capital expenditure.” Over time, mechanisms such as digital nodal accounts improve transparency. “After completion of the projects, the utilisation certificate comes to us. Only then, we get to understand whether the money is used for capital expenditure or any other purposes,” she added, highlighting the subsequent checks in place.

Tamil Nadu, as a recipient of the special assistance scheme, has cumulatively received Rs 17,189.05 crore since 2021. Despite this, the state has opted out of assistance for certain initiatives, notably scrapping old vehicles and urban planning reforms. Initially not drawing any funds in 2020-21, Tamil Nadu was allocated Rs 505.50 crore in 2021-22, Rs 4,011 crore in 2022-23, and Rs 5,326.42 crore in 2023-24, with Rs 7,345 crore disbursed by March 26, 2025.