Year-End Review 2025: Department of Expenditure | 14 Jan 2026

Source: PIB 

Why in News? 

The Department of Expenditure (DoE), Ministry of Finance, has demonstrated transformative fiscal management through large-scale digitization of benefits, strategic capital infusion to states, and comprehensive policy overhauls.

What are the Key Achievements of the Department of Expenditure? 

  • Scaling DBT for Transparency: The Public Financial Management System (PFMS) has become the backbone for 966 Direct Benefit Transfer (DBT) schemes in 2025-26, enabling Rs 2.87 Lakh Crore in direct, real-time payments to beneficiaries via 210.56 crore transactions (till 31st Dec, 2025). 
    • Enhanced citizen-centric governance through DBT Open House sessions and regional conclaves, and strengthening Centre-State collaboration for transparent fund management. 
  • Boosting State Capital Investment: Implemented the ‘Scheme for Special Assistance to States for Capital Expenditure (SASCE)’, increasing its outlay from Rs 12,000 crore (2020-21) to Rs 1,50,000 crore (2025-26). 
    • Disbursed Rs 4,49,845 crore to states since inception (2020-21) to enhance productive capacity and crowd-in private investment.  
    • Launched in 2020–21 amid the Covid-19 pandemic, SASCE provides 50-year interest-free loans to states specifically for capital expenditure, boosting economic recovery, as capital spending has a high GDP multiplier effect of Rs 3 for every Rs 1 spent. 
  • Enabling State Borrowings with Reform Incentives: Fixed the Net Borrowing Ceiling (NBC) for states at 3% of GSDP for 2025-26 as per the 15th Finance Commission (FC). 
  • Modernizing Public Procurement Frameworks: Comprehensively revised procurement manuals (Goods, Consultancy & Non-Consultancy Services, Works) to enhance ease of business, and introduce modern practices like reverse auctions and performance security reforms. 
  • Managing Finance Commission Grants & Disaster Funds: Implemented the 15th FC awards, releasing grants for Post-Devolution Revenue Deficit, Local Bodies, and Health Sector. 
  • Grievance Redressal: Streamlined resolution of over 150,000 grievances annually via an automated Customer Redressal Management (CRM) system. 
  • Pay Reforms: Constituted the 8th Central Pay Commission to review and revise pay structures for central government employees and pensioners.  

Borrowing Provisions 

  • Chapter II of Part XII of the Constitution of India deals with borrowing by the Union and the States. It contains two key provisions: 
    • Article 292 governs borrowing by the Government of India (the Central Government), authorizing it to borrow upon the security of the Consolidated Fund of India, subject to such limits as may be fixed from time to time by Parliament by law. 
    • Article 293 governs borrowing by the States. 
  • Article 293 (3) expressly requires that a State, if it remains indebted to the Central Government (or has any outstanding loan/guarantee from the Centre or its predecessor), must obtain the prior consent of the Government of India before raising any further loan. 

Current Debt Structure 

  • For the central government, the debt-to-GDP ratio is estimated to be 57.1% in 2024–25 and 56.1% in 2025–26. The government aims to bring it down to 50 ± 1% by 2030–31. 
  • At present, the state governments account for nearly one-third of total General Government debt and contributed to over 50% of the rise in overall public debt between 2014–15 and 2019–20. 

Ministry of Finance 

  • About: The Ministry of Finance manages the government’s finances and oversees all economic and financial matters. Its responsibilities include taxation, financial legislation, financial institutions, capital markets, centre–state finances, and preparation of the Union Budget.  
    • It also controls cadres such as the Indian Revenue Service, Indian Economic Service, Indian Cost Accounts Service, and Indian Civil Accounts Service. 
  • Departments under the Ministry of Finance: It operates through six departments, including the Department of Economic Affairs, Revenue, Expenditure, and Financial Services. 
    • Department of Economic Affairs prepares the Union Budget, manages macro-economic and fiscal policy, public debt, and capital markets. It also handles currency production, external financial relations (G20, BRICS), and oversees investments (FDI, NIIF). 
    • Department of Financial Services (DFS): It oversees banking, insurance, and pension reforms, managing PSBs, financial institutions like NABARD, and administering key schemes such as PMJDY, PMSBY, and PMMY. 

Conclusion 

  • The Department of Expenditure drives fiscal efficiency and cooperative federalism by leveraging digital platforms, reform-linked incentives, capital expenditure support, and procurement reforms. These efforts strengthen transparent governance, State finances, and service delivery while aligning public spending with long-term economic growth objectives.

Drishti Mains Question:

Examine the role of the Scheme for Special Assistance to States for Capital Expenditure in boosting economic growth.

Frequently Asked Questions (FAQs) 

Q. What role does PFMS play in India’s DBT ecosystem? 
PFMS enables real-time, transparent fund transfers and supports 966 DBT schemes, ensuring efficient last-mile delivery and fiscal accountability. 

Q. What is the Scheme for Special Assistance to States for Capital Expenditure? 
It provides 50-year interest-free loans to States to boost capital expenditure, crowd-in private investment, and enhance productive capacity. 

Q. How does the Net Borrowing Ceiling support fiscal discipline? 
The 3% of GSDP NBC, as per the 15th Finance Commission, balances State fiscal autonomy with macroeconomic stability. 

UPSC Civil Services Examination, Previous Year Question (PYQ) 

Prelims 

Q. Which of the following is/are included in the capital budget of the Government of India? (2016)

  1. Expenditure on acquisition of assets like roads, buildings, machinery, etc.  
  2. Loans received from foreign governments  
  3. Loans and advances granted to the States and Union Territories  

Select the correct answer using the code given below:  

(a) 1 only  

(b) 2 and 3 only  

(c) 1 and 3 only  

(d) 1, 2 and 3  

Ans: (d)

Mains

Q. Reforming the government delivery system through the Direct Benefit Transfer Scheme is a progressive step, but it has its limitations too. Comment. (2022)