Borrowing can finance a long-lived asset whose benefits extend over years, but it creates future repayment and interest obligations. A state can also borrow for cash-flow reasons or to cover a broader fiscal gap. The sustainability question is whether economic growth and reliable revenue can support the debt service while essential services and investment continue. Gross borrowing, net borrowing, outstanding debt and contingent liabilities are separate measures. An exam option that treats them as synonyms should be rejected.

The 2026-27 Budget at a Glance charts public debt at about ₹7,11,094 crore for BE 2026-27, roughly 36% of projected GSDP. This is a budget-document projection. The same publication lists interest payments of ₹37,280.55 crore in the year's expenditure. Interest has a direct opportunity cost: money committed to debt service cannot simultaneously be allocated to a new school or road. But the economic assessment of an older borrowing also depends on whether it created productive infrastructure.

Guarantees to public enterprises and power entities can matter even when they are not booked as ordinary budget debt. Their risk depends on whether the underlying entity can pay. A careful reader consults the FRBM statement and CAG accounts alongside the Budget at a Glance before making a claim about liabilities. In an SI or Constable paper, learn the difference between stock, flow and service cost before memorizing a debt ratio.

Worked example: A state borrows ₹100 for a road expected to serve many years. The loan adds to outstanding debt; interest is the yearly cost of carrying it; repayment reduces principal. The annual deficit is a flow, while debt is a stock at a date. A government guarantee for a utility can create a future claim even if it has not yet been paid from the budget. These distinctions matter more than a single undated debt percentage.

Active recall: Separate gross borrowing, outstanding debt and annual interest. Why might a government guarantee become a fiscal risk?