Borrowing for schools, hospitals okay, but not for freebies: FM Sitharaman

Union Finance Minister Nirmala Sitharaman has stated that state governments are justified in borrowing if the funds are channelled into long-term capital expenditure such as building schools and hospitals, rather than being used for revenue expenditure like cash handouts. Speaking at a book launch event in Kancheepuram, Tamil Nadu, on Tuesday, she emphasised that the purpose of borrowing matters more than the act itself.

“Borrowing is not the issue. What matters is how the borrowed money is used. Is it creating assets, improving education, promoting industries, or generating employment? That should be the focus. States are permitted to borrow up to 3% of their Gross State Domestic Product,” Ms. Sitharaman said.

The Finance Minister was in Kancheepuram to launch the book Daughters of Kanchi at the SSKV College of Arts and Science for Women. The book traces the history of women's education in the region and the growth of the Conjeevaram Hindu Education Society and SSKV Group of Institutions. The event was held in the presence of Shankara Vijayendra Saraswathi Swami of Kanchi Kamakoti Peetam.

Drawing on the city's historical legacy, Ms. Sitharaman remarked, “Standing here in Kancheepuram, the first thing that comes to my mind is even in ancient times, this city was renowned for education.” She noted that scholars from across the world, including China and Tibet, once came to Kancheepuram to learn. “Even those in the northern direction of Bharat can come here and learn, and people from here can go there as well. That is why I say this without any political angle; when it comes to education, you can go from here to the north, from the north to the east, or from the east to the west,” she added.

C.K. Raman, Secretary of Conjeevaram Hindu Educational Society and SSKV Institutions, informed that the SSKV Group now educates 10,000 children. Nandita Krishna, president of the society, recounted the institution's origins: “In 1904, two gentlemen of Kanchi – Diwan Bahadur Sri Somasundara Sastriar and Sri Ramanatha Sarma – decided to establish a school for girls. Parvathammai, the first headmistress, would go from house to house requesting parents to send their daughters to be educated.” She said the book Daughters of Kanchi pays tribute to those who contributed to the growth of the education society and the SSKV Group.

The Finance Minister's remarks come amid ongoing debates over state fiscal discipline and the central government's borrowing limits for states. Her comments reinforce the distinction between productive capital expenditure and unproductive revenue spending, a key theme in recent Union budgets.