Non-debt creating capital receipts

Also called: NDCR, Non-debt capital receipts · Topic: Government Budget, Fiscal Policy and FRBM · NCERT: Class 12, Ch 5 "Government Budget and the Economy"

Meaning

Non-debt creating capital receipts (NDCR) are capital receipts that do not create any debt for the government. The government does not have to repay them. They come from reducing an asset the government owns: recovering the principal of loans it gave, selling PSU shares (disinvestment) and other receipts such as asset monetisation.

They matter because they are counted with revenue receipts before we work out how much the government must borrow. So every rupee of NDCR directly lowers the fiscal deficit.

Formula: Fiscal deficit = Total expenditure − (Revenue receipts + Non-debt capital receipts)

Explanation

How a receipt becomes "capital, non-debt"

• Two-question test for any receipt: 1. Does it create a liability (a debt the government must repay later)? 2. Does it reduce an asset (something the government owns, such as a loan it gave or PSU shares)?

• If the answer to either question is yes, it is a capital receipt. If both answers are no, it is a revenue receipt.

• NDCR = answer 1 is "No" and answer 2 is "Yes."

• Nobody gains a claim on the government.

• But the government gives up something it owned, and with it the future income that asset would have earned.

• Debt-creating capital receipts are the opposite: answer 1 is "Yes." Examples are market borrowings, small savings and external loans.

The components of NDCR

• Recovery of loans: principal repaid to the Centre by states, PSUs and others.

• Trap: the interest on that loan is non-tax revenue. Only the principal is NDCR.

• Disinvestment: the government sells part or all of its shares in PSUs (public sector undertakings).

• Other receipts, such as asset monetisation: brownfield assets (already built and running, such as roads, pipelines and transmission lines) are leased to private players for an upfront or periodic payment.
• Ownership is not transferred. The asset comes back to the government when the lease ends.

What makes NDCR rise or fall

• Disinvestment is the swing factor. It depends on stock market conditions, investor interest and political will, so targets are often missed.
• Loan recoveries depend on how much the Centre lent in the past and on repayment schedules. They are smaller but steadier.
• Monetisation depends on how many assets are ready to lease and whether private players want to bid for them.
• Why NDCR is a one-time source:
• An asset is sold once, so the cash comes in once.
• The asset and its future income (dividends, interest) are then gone.

Worked example: NDCR and the fiscal deficit (2026-27 BE) [2]

• Total expenditure: ₹53,47,315 crore.
• Revenue receipts: ₹35,33,150 crore.
• NDCR: ₹1,18,397 crore (disinvestment ₹80,000 crore + recoveries of loans ₹38,397 crore).
• Receipts excluding borrowings: 35,33,150 + 1,18,397 = ₹36,51,547 crore.
• Fiscal deficit: 53,47,315 − 36,51,547 = ₹16,95,768 crore. This equals the budgeted borrowing and is 4.3% of GDP [2].
• If disinvestment falls ₹20,000 crore short and spending stays the same:
• NDCR falls by ₹20,000 crore.
• Borrowing must rise by ₹20,000 crore.
• The fiscal deficit rises by the same ₹20,000 crore.

In India

• Legal frame: the Budget is the Annual Financial Statement under Art. 112. NDCR sits in the capital budget, the part of the Budget that records changes in the government's assets and liabilities. The fiscal deficit worked out using NDCR is the main target under the FRBM Act, 2003.
• Who manages it:
• DIPAM (Department of Investment and Public Asset Management) handles disinvestment. It was renamed from the Department of Disinvestment in 2016.

• NITI Aayog prepared NMP 2.0, the second National Monetisation Pipeline, under the Asset Monetisation Plan 2025-30 [4].

• Latest figures:

• 2024-25 actuals: ₹41,818 crore. Of this, recoveries of loans were ₹24,617 crore and disinvestment ₹17,202 crore [2].
• 2025-26: budgeted at ₹76,000 crore [3]. It came in about 15.7% lower at the revised stage, mainly because disinvestment fell short [2].
  • The disinvestment target was ₹47,000 crore. Only about 71.9% (≈₹33,837 crore) was expected to be met [2].

• 2026-27 BE: ₹1,18,397 crore, up 85%. The disinvestment target is ₹80,000 crore, the first increase after five years of cuts and shortfalls [2].

• Disinvestment milestones:

• 1991-92: target ₹2,500 crore; about ₹3,040 crore raised (NCERT).
• New PSE Policy 2021: splits sectors into strategic and non-strategic. The government keeps only a minimum presence in strategic sectors.

• Air India sold to the Tata group (January 2022). LIC IPO (2022).

• Asset monetisation:

• NMP launched in August 2021, with a target of ₹6 lakh crore for FY22-25. About ₹3.85 lakh crore was monetised in its first 3 years [5].
• NMP 2.0 has a monetisation potential of ₹16.72 lakh crore for FY2026–FY2030 [4]. It aims to plough back ₹10 lakh crore into new projects [4].

Don't confuse with

• Debt-creating capital receipts: borrowings, such as G-secs, T-bills, small savings through the NSSF and external loans, create a liability. NDCR does not. Debt receipts finance the fiscal deficit. NDCR reduces it.
• Non-tax revenue: interest on loans and dividends from PSUs or the RBI are revenue receipts, because no asset is reduced. Recovery of loan principal and the sale of PSU shares are capital receipts.
• Disinvestment vs asset monetisation: both are NDCR. Disinvestment transfers ownership (shares are sold). Monetisation only leases the right to use and earn from an asset for a fixed period, and ownership stays with the government.
• Revenue receipts: these are non-redeemable and recurring. NDCR comes from giving up an asset, so it is mostly one-time.

Prelims Hooks

• NDCR = capital receipts that reduce an asset but create no liability: recovery of loans, disinvestment and other receipts such as asset monetisation.
• Fiscal deficit = Total expenditure − (Revenue receipts + Non-debt capital receipts). A higher NDCR means a lower fiscal deficit.
• Trap: interest received on a loan = non-tax revenue. Repayment of the loan principal = NDCR.
• Trap: small savings (NSSF), T-bills and external loans are debt-creating, not NDCR.
• Asset monetisation counts as NDCR even though ownership is not transferred. NMP launched in August 2021; NMP 2.0 has a potential of ₹16.72 lakh crore for FY2026–FY2030 [4].
• 2026-27 BE: NDCR ₹1,18,397 crore, of which disinvestment is ₹80,000 crore and recoveries of loans ₹38,397 crore [2].

Mains Points

• Quality of fiscal consolidation: NDCR is one-time and volatile.
• In 2025-26 it fell about 15.7% short at the revised stage, and only about 71.9% of the disinvestment target was expected to be met [2].
• Any shortfall pushes up borrowing one-for-one. Interest already takes about 40% of revenue receipts (2026-27 BE) [2].

• Reaching the 16th Finance Commission's goal of a Centre fiscal deficit of 3.5% of GDP by 2030-31 [2] therefore needs tax buoyancy (tax revenue growing faster than GDP), not asset sales alone.

• Disinvestment for what? NCERT criticises two things: PSE assets were undervalued, and the proceeds were used to plug revenue gaps.

• How the loss happens: an asset is sold → the one-time cash is spent on salaries and subsidies → both the asset and its future income are lost.

• Better practice: use the money from selling a capital asset to create new capital assets.

• Monetisation as a middle path: NMP 2.0 raises cash while the government keeps ownership, and it plans to plough back ₹10 lakh crore into new projects [4]. This link between NDCR and infrastructure investment is useful for GS-III answers on growth and fiscal policy.

Related concepts

• Revenue budget
• Capital budget
• Revenue receipts
• Tax revenue
• Non-tax revenue
• Capital receipts
• Debt-creating capital receipts
• Asset monetisation

Read more

• Budget receipts: revenue vs capital, tax vs non-tax, debt vs non-debt