On Aug 7, Finance Minister Nirmala Sitharaman spoke at the C.D. Deshmukh Memorial Lecture organised by NCAER in New Delhi. She addressed how the Centre has helped several states restructure debt to cut interest costs.
She urged state governments to keep fiscal discipline and use borrowing for productive asset creation rather than covering recurring expenses. States must plan long‑term when taking on debt.
The minister said many states are working to tidy up public finances, but borrowing decisions must consider future implications. A conscious effort is needed to match spending with borrowing.
She highlighted that the Centre encourages states to manage their debt profile actively instead of allowing liabilities to pile up. This approach helps keep debt sustainable.
Without naming specific states, she noted that the Centre has assisted several states, even those led by opposition parties, in restructuring debt to lower annual interest costs. Debt cannot be ignored.
Sitharaman stressed that local bodies also need stronger institutional capacity and transparency to use funds from the 16th Finance Commission. Local bodies must be ready to deploy resources effectively.
She explained that a key condition for receiving Finance Commission grants is the presence of democratically elected local bodies. If elections are not held, the money remains unused.
The minister said the Centre’s post‑pandemic capital expenditure strategy focuses on building long‑term public assets that attract private investment. This helps the economy grow.
She cautioned against borrowing only to service existing debt. Borrowing should reduce the debt burden for future generations, not add to it.
Sitharaman added that weaker states need continued support to build capacity and participate in India’s growth. Laggard states should not remain behind.
She also mentioned that policies to boost exports and manufacturing require coordinated action from the Centre and all states. No single state can achieve these goals alone.
In closing, the finance minister called for empowering states, providing resources, and building capacity so that India’s aspirations can be met. The Centre’s role is essential in this effort.