Out of every ₹100 the Union government borrows in fresh loans today, nearly ₹82 is spent on servicing interest on older debt, leaving much less of the newly borrowed money available for fresh expenditure, argues Rajya Sabha MP John Brittas.
In a written reply tabled by the finance ministry in the Rajya Sabha to a question by him on the Union government's liabilities, the government, on Tuesday, revealed that interest payments on existing debt amounted to 50.9 per cent of fresh borrowings in FY22. By FY26, that ratio had climbed sharply to 81.8 per cent.
Notably, in the Centre’s view, there are two caveats. Post Covid, the ratio of debt service (interest payment) to revenue receipts has broadly declined from 41.6 per cent in FY 2020-21 to 37.6 per cent in FY 2025-26 (Prov). The government cites this as indicative of its ability to finance requirements of debt servicing through revenue receipts. The government also notes that in BE 2026-27, the effective capital expenditure of ₹17.15 lakh crore is higher than the fresh debt receipts (fiscal deficit) of ₹16.96 lakh crore of the government. This has been cited to imply that borrowings are entirely used for creation of assets.
“This assertion is deeply misleading for several reasons,” said Brittas. “First, the government juxtaposes actual and provisional data up to 2025-26 with a Budget Estimate for 2026-27, which is merely a projection and not an audited outcome. Such a comparison cannot be used to draw conclusions about the utilisation of borrowings. Second, the government's own figures demonstrate that interest payments are consuming an ever-growing share of borrowing capacity (81.8 per cent in 2025-26). The claim that borrowings are "entirely" financing asset creation ignores the fiscal reality that interest obligations must necessarily be financed from the government's overall resources, including borrowed funds where revenues are insufficient. A high interest-to-borrowing ratio of 81.8 per cent is itself evidence of mounting debt-servicing pressures.”
As of March 31, 2026, the central government's total debt crossed the ₹200-lakh-crore threshold to stand at ₹201.17 lakh crore. Up from ₹138.66 lakh crore five years ago (FY22), the total debt has grown significantly.
“The government admits that the Union government's outstanding debt has had an increase of over ₹62.5 lakh crore, or about 45 per cent in just five years,” noted Brittas. “At today's population, this amounts to an outstanding Union government debt of around ₹1.36 lakh for every Indian, underlining the enormity of the fiscal burden disclosed by the government itself.”
Notably, over 95 per cent of this debt is internal (borrowed in Indian Rupees from domestic investors, public accounts, and banks). Only ₹9.89 lakh crore is external debt (borrowed internationally in foreign currency).
The annual shortfall between spending and earnings has come down—from 6.7 per cent of GDP (₹15.84 lakh crore) in FY22 down to 4.4 per cent of GDP (₹15.19 lakh crore) in FY26. Nevertheless, the government reply itself warrants caution in interpreting the apparent decline in the debt-to-GDP ratio and fiscal deficit ratio.
The ministry acknowledged that from FY 2022-23 onwards these ratios are based on a new GDP series, while earlier years use the old GDP series, and expressly states that the two are "generally not comparable." “Therefore, any claim of sustained improvement based on these ratios alone would be statistically unsound,” noted Brittas.
