India’s fiscal deficit for the April-October period rose on higher capital expenditure and lower net tax revenue.
The fiscal deficit stood at ₹ 8.25 trillion, or 52.6% of the 2025-26 budget target, showed data released by the Controller General of Accounts (CGA) on Friday.
That compares with ₹7.51 trillion or 46.5% of the estimate in the year-ago period.
The central government’s fiscal deficit target is 4.4% of the gross domestic product (GDP) for 2025-26, as announced by finance minister Nirmala Sitharaman in the Union budget. The government ended fiscal 2024-25 with a fiscal deficit of 4.8%, which was lower than the revised estimates of 4.9%.
In absolute terms, the budgeted fiscal deficit stands at ₹15.69 trillion for 2025-26.
Receipts and expenditure
In the first eight months of FY26, net tax revenue stood at ₹12.74 trillion, or 44.9% of the target set in the annual budget in February, compared to ₹13.05 trillion or 50.5% of the target in the same period a year ago, showed the CGA data.
Tax revenues have been impacted by the income-tax rebate announced in the February budget, effectively reducing the tax liability to zero for citizens earning up to ₹12 lakh per year.
Non-tax revenue stood at ₹4.89 trillion or 83.9% of the annual budget estimates, as against ₹3.99 trillion in the year-ago period, or 73.2% of the year’s target. The total revenue receipts stood at ₹17.63 trillion, or 51.6% of the estimates for 2025-26, versus ₹17.23 trillion or 53.7% of the target a year earlier.
Total government expenditure stood at ₹26.26 trillion, or 51.8% of the annual target, compared to ₹24.74 trillion, or 51.3% of the budgeted estimate, in the year-ago period.
Capex stood at ₹6.18 trillion during the period, or 55.1% of the annual estimate for 2025-26, compared to ₹4.67 trillion or 42% of the annual estimate during the year-ago period.
The fiscal deficit period reflects a slippage due to both higher spending and lower receipts as a share of budgeted estimates, according ot experts.
“Capex is at 55% of the budget amount, which was lower at 42% last year. However, in 2024, capex was affected in the first quarter by the elections. The positive factor is that the amount spent on roads and railways is higher in proportionate terms this fiscal year, showing progress being made,” said Madan Sabnavis, chief economist at Bank of Baroda.
“On the revenue expenditure side, fertilizer subsidy is higher and needs to be controlled. Revenue from goods and services tax (GST) could be lower, which really means that there may have to be close monitoring on the expenditure side. While non-tax revenue through RBI transfer has provided a lot of support, it needs to be seen if other tax components are able to grow and meet the targets,” he said.
The central government’s spending on all subsidies amounted to ₹2.47 trillion in the period, reaching 64% of the annual target, compared to ₹2.49 trillion spent during the same period of the previous fiscal.
Spending on nutrient-based fertilizer subsidy, however, rose to ₹353.87 billion in the April-October 2025-26 from ₹311.73 billion in the year-ago period.
Aditi Nayar, chief economist at Icra Ltd, said achieving the 2025-26 target will be challenging as gross tax revenues need to rise by a steep 24% in the remaining months, and CGST collections alone would have to expand about 18% over November-March, which is a difficult ask.
“Overall, we believe that higher-than-budgeted non-tax revenues would absorb a part of the shortfall on the taxes front. On the expenditure side, while there could be some additional allocation towards the fertilizer subsidy and any supplementary demand for grants, if announced, this would be offset by the expenditure savings of various ministries, in line with the typical trend seen during a fiscal year,” she said.
“Consequently, we do not expect a material fiscal slippage at the current juncture,” she added.
Unprecedented dividend payout
The Indian government’s fiscal deficit target of 4.4% of GDP, outlined in the budget, is bolstered by an unprecedented dividend payout from the Reserve Bank of India.
The ₹2.56 trillion disbursement marks a 21% rise over 2024-25’s dividend and provides a crucial buffer for 2025-26, offsetting potential shortfalls in tax revenue or hikes in public spending.
The Centre is aiming to narrow the public debt towards 50% of GDP by FY31, keeping its fiscal deficit at about 4.1%-4.2% in FY27.