Datanomics: Resource crunch remains major concern in Bihar's finances

Weak tax collections in October pushed Bihar's fiscal deficit to three times the FY26 budget estimate in seven months, with pre-poll spending adding pressure

A meagre tax collection in October has widened Bihar’s fiscal deficit to three times of the Budget Estimates (BE) for the first seven months of 2025-26 (FY26). The ₹10,000 crore transferred to women beneficiaries ahead of the Assembly polls is also a contributing factor in this, but low capital outlay due to the model code of conduct (MCC) being in place during October eased the outgo on cash dole-outs to an extent.

 

Shaky financials

 

While the fiscal deficit in the first seven months of FY26 as percentage of BE has zoomed the most in the last seven years, revenue deficit was higher in the previous two years. The minus sign in revenue deficit (see chart) means that the state Budget assumed revenue balance to be in surplus in these years. For FY26, the Budget has projected the fiscal deficit at three per cent and the revenue surplus at 0.8 per cent of the gross state domestic product (GSDP). 

*In first 7 mths as % of BE for the full year | Source: CAG

 

Tax collections plunged in Oct

 

One of the primary causes of widening fiscal and revenue deficits was an abysmally low tax collection in October which dragged down revenue receipts to just ₹540 crore. While tax collections in this month cannot be compared to August and September figures partly due to advance payments, the mopup defies other months’ trends as well. 

*Revenue receipts comprise of tax and non-tax receipts | Source: CAG

 

Minor poll effect

 

While cash dole-outs raised revenue expenditure in September and October, they were partly offset by slash in capital outlays due to MCC.