Fiscal deficit widens to 38% of BE on higher capex, weak taxes: CGA

India's fiscal deficit rose to 38.1 per cent of FY26 budget estimates in April-August, driven by higher capital expenditure and muted revenue receipts, CGA data showed

The Centre's fiscal deficit for April-August period of FY26 widened to 38.1 per cent of budget estimates (BE) or ₹5.98 trillion, against 27 per cent of BE in the corresponding period last year, according to the data released by the Controller General of Accounts (CGA) on Tuesday.

 

This comes in the backdrop of increased capital expenditure and muted growth in revenue receipts compared to the same period the previous year.

 

The net tax collection witnessed a contraction of 7 per cent and stood lower at 28.6 per cent (₹8.1 trillion), against 33.8 per cent last year, with both income and corporate tax collections marginally lower than last year during the April-August period. Income tax collections contracted by 2 per cent and gross tax revenues expanded by 1 per cent in the first five months of FY26. Experts attributed this to extension of the deadline to file taxes as well as an adverse base.

 

 

The CGA data shows that the capital expenditure for the first five months of the current financial year stood at 38.5 per cent of BE compared to 27 per cent last year when the government spending was curtailed due to elections. Capex for April-August FY26 has reached ₹4.31 trillion, CGA data showed. The total expenditure in the April-August period of FY26 rose by 14 per cent on account of a 43 per cent increase in capex during this period.

 

“After the 11 per cent year-on-year (Y-o-Y) dip in July 2025, the Government of India’s capex more-than-doubled in August 2025, pushing up the growth to a robust 30 per cent in July-August 2025, which augurs well for economic activity in the quarter,” said Aditi Nayar, chief economist, Icra.

 

Revenue-wise, however, the total receipts in April-August were lower at 36.6 per cent of FY26 BE or ₹12.5 trillion compared to slightly higher collection at 38.6 per cent of BE in April-August of FY25, according to the CGA data.

 

The ministries with the highest amount of capital expenditure, both roads and railways, have seen an increase in expenditure in proportion to budget allocation during April-August FY26 period at 43 per cent and 52 per cent, respectively compared to 39 per cent and 45 per cent in the same period last year.

 

“It does look like that the overall fiscal deficit target will be retained as it is also borne out from the borrowing calendar for the second half of the year,” said Madan Sabnavis, chief economist, Bank of Baroda.

 

Experts said that despite low growth in revenue, the government’s recently announced borrowing calendar for the second half of the current financial year provides confidence in fiscal management.

 

“If a double-tranche of tax devolution is shared with the states in October 2025 amidst the festive season, it would further signal confidence on meeting the overall revenue target, notwithstanding some potential small miss on the tax collections,” Nayar added.

 

Department of Economic Affairs Secretary, Anuradha Thakur, recently said that the government was confident of achieving the fiscal deficit target of 4.4 per cent for FY26.