E-Paper
State finances: Capital spendings continue to be sluggish as revenue expenditure consume budget outlay
Speaking at a pre-budget briefing ahead of 2026-27 budget, Saini said the actual expenditure is expected to reach around ₹2 lakh crores by March 31 - about 98% of the outlay and this would be the first time that such a high proportion of the budget outlay was utilised.
Haryana chief minister Nayab Singh Saini who holds the finance portfolio sounded upbeat on Tuesday when he announced that state’s actual expenditure till February 16 stood at ₹1,59,747 crore – about 77.9% of the total budget outlay of ₹2,05,017.29 crore for 2025-26 fiscal.
Speaking at a pre-budget briefing ahead of 2026-27 budget, Saini said the actual expenditure is expected to reach around ₹2 lakh crores by March 31 - about 98% of the outlay and this would be the first time that such a high proportion of the budget outlay was utilised.
However, what he conveniently forgot was that the capital expenditure which is the money spent by the government on creation of long-term assets like infrastructure projects, roads, bridges, educational institutions, health care facilities and for undertaking development works constituted less than 9% of the total spendings. Capital expenditure helps boost and sustain economic growth.
Haryana, in fact, has in the past couple of years, seen a dip in allocation for capital expenditure. In 2025-26 budget estimates presented by Saini, the proposed capital expenditure was at ₹16,164.11 crore (minus loans and advances) as compared to what his predecessor Manohar Lal Khattar had committed - ₹16,280.94 crore - in the 2024-25 estimates. The state government’s actual spendings on asset creation in 2024-25 till March 17, 2025 were ₹12,752.52 crore, as per budget documents.
16th Finance Commission on freebies
A substantial portion of the state’s budget outlay is consumed by revenue expenditure on salaries, pensions, social security schemes, freebies like subsidised LPG cylinder, rural electrification subsidy and unconditional cash transfer schemes like Lado Lakshmi Yojana. The BJP led Haryana government had allocated ₹5,000 crore alone in 2025-26 budget estimates for implementing its 2024 poll promise of providing monthly financial assistance of ₹2,100 to women under the Lado Lakshmi Yojana.
Expressing concern over the vibrant “freebies” debate, triggered by the recent proliferation of subsidies alongside tight fiscal constraints, the 16th Finance Commission in its report, tabled by the Union finance minister Nirmala Sitharaman, in the Parliament on February 1, said that undue expansion of subsidies can crowd out capital expenditures that are critical to long-term growth. “However attractive these subsidies may seem from the immediate perspective, by creating permanent entitlements, they can have a serious impact on the governments’ long‑term fiscal health. The importance of exercising discretion when considering the expansion of subsidies cannot be overstated. In fact, it is essential to pay attention not only to aligning the magnitude of expenditures to potential revenues, but also to focus on their quality,’’ the report signed by chairman of the commission, Arvind Panagariya said.
As per state government statistics, it had spent about ₹99,000 crore as revenue expenditure till January 2026 as compared to spending about ₹12,100 crore as capital expenditure. Officials, however, said that Haryana’s capital expenditure for 2025-26 fiscal was about 12-13% higher than what the government had spent in 2024-25.
The state government, it is learnt, has spent about 59% of total capital outlay of ₹20,812 crore (including loans and advances) till January 2026 which was up by about 4% from spendings till December 2025.
Commission on Haryana’s revenue deficit
The 16th Finance Commission’s report said that until recently, Haryana had the highest per capita income among the large states. “Currently, it ranks third. Like Tamil Nadu, it had a low debt‑to‑GSDP ratio of 18.8 % in 2011‑12, which steadily increased in the subsequent years, reaching 29.7 % in 2019‑20, spiking to 33.5% in 2020‑21, and then declining to 30.5 % by 2023‑24. The state ran revenue deficits throughout the period under review, which exceeded 2.3% in four out of the 13 years. It also incurred a fiscal deficit of 3% or more during eight out of the 13 years.
The chief minister at the briefing said the fiscal deficit was the best indicator of financial management. The state’s fiscal deficit for 2024-25 stood at 2.83% of the GSDP, compared to 2.88% in 2014-15; both were within the Fiscal Responsibility and Budget Management (FRBM) limit of 3%, indicating improved fiscal discipline.
The Finance Commission in its report said there were two reasons why successive commissions have drawn attention to government subsidies, inclusive of cash and in‑kind transfers. “First, their unbridled expansion, with no offsetting cuts in other expenditures, can lead to large fiscal deficits, high public debt, and ultimately fiscal instability. Second, if driven by populism, they may crowd out other high‑priority expenditures, such as those on education, health, infrastructure, law and order and defence,” the report said.
In fact, chairman of the commission, Arvind Panagariya had told HT on April 28, 2025 that the competitive populism by states doling out freebies was a cause of concern for the commission but it is struggling to address the question as to what would qualify as a freebie.
