FM Sitharaman Flags Deep Concerns Over States Borrowing Heavily To Fund Freebies
Sitharaman noted that states may need to replace older, expensive loans — even with penalties — because some are no longer able to service their borrowings.
Finance Minister Nirmala Sitharaman delivered a pointed warning on the escalating culture of state-level freebies, saying the problem isn’t the giveaways themselves but the fact that “their budget cannot afford it.”
Speaking at the Hindustan Times Leadership Summit, she said the Centre is increasingly worried about states borrowing to fund such schemes, stressing that “borrowing to service the loan is not a good quality,” and revealing that multiple states are now in talks with the Union government on restructuring their debts.
Sitharaman said the Centre is offering support not through funds but through expertise, with officials from the expenditure and economic affairs departments prepared to sit with state finance teams to rethink loan structures.
She noted that states may need to replace older, expensive loans — even with penalties — because some are no longer able to service their borrowings. Several states, she added, have shown interest and already benefited from such restructuring.
In a separate but equally consequential signal, the Finance Minister said a sweeping overhaul of India’s customs framework is on the way, calling it her “next big clean-up job.” Speaking at the Hindustan Times Leadership Summit, she said the customs regime needs simpler rules, full transparency and a shift to 100% faceless processes.
While India is broadly aligned with global customs norms, Sitharaman said execution gaps continue to slow efficiency — similar to the challenges once seen in income tax administration before comprehensive reforms eliminated what she described as “tax terrorism.” The government is now preparing a comparable technology-driven revamp for customs.
A key factor pushing the overhaul is the rising risk of illicit contraband entering the country, which Sitharaman called a “serious problem.” The aim, she said, is to implement stronger risk-based checks without adding friction for legitimate trade, while eliminating discretion and reducing harassment through automation.
She noted that customs duties have been steadily reduced over the past two years, but some high slabs “will have to come down” as part of a broader rationalisation to cut disputes, boost compliance and enhance competitiveness. The Minister stressed that the revamp is already underway and “not a secret I’m letting out before the Budget,” though she left it to the media to decide whether it qualifies as a “big bang reform.”
