States push for more fiscal room, seek expansionary Union budget

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Subscribe to enjoy similar stories. State governments on Friday sought extra headroom for their borrowings and greater fiscal support for their capital expenditure from the Centre, while advocating an expansionary union budget for FY26 to arrest an economic slowdown and a weakening currency. States also advocated that macroeconomic challenges should be comprehensively addressed in the Union budget.

Punjab and Kerala sought special financial packages including more loans, grants, and borrowing flexibility. Ministers from 28 states, including some of the chief ministers and deputy chief ministers, attended Union finance minister Nirmala Sitharaman’s budget consultations on Friday in Jaisalmer. Officials from Delhi, Nagaland and Chhattisgarh attended the meeting in place of their ministers.

“States urged for an increase in borrowing limits to support fiscal activities and highlighted the need for state-specific road development and railway projects. Some states asked the central government to bear a larger share of land acquisition costs for projects," said a person informed about discussions between the Centre and states. “The size of the government expenditures at both national and state levels are vital for achieving faster economic growth as demonstrated by most developed nations," Kerala finance minister K.N.

Balagopal said at the meeting. Balagopal said the state was on a path of fiscal consolidation, but it was essential to recognize that if achieved through restrictions in government expenditure, it may not necessarily be a desirable outcome and may even hinder economic growth and render fiscal consolidation efforts counterproductive. The minister sought a ₹24,000 crore special package spread over two years and a