Archive · 5 Jan 2026
Indian States Plan Record Borrowing for FY26
Indian states and Union Territories plan to borrow a huge amount of money, Rs 5 lakh crore, in the last three months of the 2025-26 financial year.
This is the biggest borrowing ever for a single quarter.
They need this money to pay for things like building roads, schools, and hospitals, and to help people through social welfare programs.
Some states like Karnataka are good at collecting taxes, while others like Gujarat are spending a lot on building new things.
The government is also spending a lot on big projects, but some experts think they might spend too much and others think they should spend more.
The money borrowed will help the states do more things for the people.
Indian states and Union Territories plan to borrow Rs 5 lakh crore in Q4 FY26, the highest ever for a single quarter.
Karnataka leads in tax revenue growth, followed by Maharashtra and Uttar Pradesh.
Gujarat tops in capital expenditure growth, with Maharashtra and Karnataka following.
Total borrowing for FY26 is expected to reach record levels, with Rs 7.13 trillion already raised.
Economists are divided on whether the central government's capex will exceed the budgeted estimate of Rs 11.21 lakh crore.
- Who
- Indian states and Union Territories
- What
- Borrowing Rs 5 lakh crore and planning capital expenditure
- When
- January–March 2026 (Q4 FY26)
- Where
- India
- Why
- To meet rising fiscal requirements, fund infrastructure development, operational expenditure, and social welfare schemes
Economists Supporting Capex Growth
Economists Against Capex Growth
Capex Target Achievement
Economists Supporting Capex Growth
Aditi Nayar anticipates the government will enhance capex allocation, limiting contraction in the last four months.
Economists Against Capex Growth
Madhavi Arora rules out capex overshooting, predicting a 20% degrowth in the second half.
Fiscal Deficit Management
Economists Supporting Capex Growth
NR Bhanumurthy believes the capex target of 3.1% of GDP will be maintained to meet the fiscal deficit target of 4.4% of GDP.
Economists Against Capex Growth
Madan Sabnavis suggests the Centre may cut back on capex if there are pressures on fiscal balances due to lower tax collections.
- Borrowing Amount
- Rs 5 lakh crore
- Borrowing Period
- January–March 2026 (Q4 FY26)
- Total Borrowing in FY26
- Rs 7.13 trillion (so far)
- Impact on Bond Market
- Potential rise in bond market yields and financing costs
- Top States in Tax Revenue Growth
- Karnataka, Maharashtra, Uttar Pradesh
- Top States in Capital Expenditure Growth
- Gujarat, Maharashtra, Karnataka
- Fiscal Deficit Limit for States
- 3% of GSDP (as per 15th FC recommendation)
- Estimated Fiscal Deficit for FY26
- 3.2% of GSDP
Sources
Indian states to borrow Rs 5 lakh cr in Q4 FY26!
Economists divided on centre’s capex pace in December-March
Karnataka recorded highest growth in tax collection, Gujarat in capital expenditure
Banks Eye Double-Digit Growth in Q3 FY26
For Centre & state finances, a reckoning
Centre May Set 54.5%-55% Debt-To-GDP Goal In Union Budget
