Union Finance Minister stresses the need for governments to diversify sources of income

Union Finance Minister Nirmala Sitharaman on Friday said a government that planned to dole out freebies must ensure that they have adequate sources of income to sustain the programme during its full tenure of five years.

Participating in an interactive session on the opening day of Bharat Shakti Pondy Lit Fest 2026 in Puducherry, the Finance Minister said any government that planned to go the welfare route should take a “dispassionate” view on whether the programme was sustainable with adequate financial resources at its disposal for implementation.

“There is nothing to sensationalise the subject of freebies/welfare measures adopted by a government. Be it Centre or State. Any government that plans welfare schemes should first think whether I have put it in the budget and whether it is sustainable for five years. If it is sustainable we can remove the programme from the category of freebies,” she said.

Pointing out the dangers of implementing unplanned welfare programmes, Ms. Sitharaman said when 80 per cent of the tax collected was set aside for committed expenditure, the government was left with remaining 20 per cent for building hospitals, schools and other capital expenditure. It will be difficult for any government to manoeuvre through the limited resources for fulfilling the welfare commitment, she said.

“There is a State which was revenue surplus, that not only went revenue deficit in three years, but also want to borrow beyond the ceiling of three per cent of their GSDP for running the government after implementing freebies. There is a need for any government to diversify sources of income. The Central government on its part has rightly taken measures to diversify its sources of income,” the Minister said.

Ms. Sitharaman said the proposed Merchant Discount Rate on UPI transactions was neither a tax, a cess nor a surcharge and would not be passed on to consumers. “The MDR is between a merchant and the service provider. It does not come to our tax kitty. After our government came to power, we have only tried to reduce the burden of people by reducing taxes,” the Finance Minister said. 

She also expressed dismay over State governments not utilising the budgetary support extended by the Centre for conducting skilling programmes for ITI students. “Except States such as Odhisa and Assam, not many governments have come forward to avail the opportunity for skilling the students of their ITIs,” Ms. Sitharaman added.