India’s fiscal deficit came in higher at Rs 4.7 lakh crore, or 29.9 percent of the full-year target, during the first four months of FY26 as compared to 17.2 percent during the same period a year ago, according to data released on August 29.
Capex Drives Deficit Rise
The widening fiscal deficit reflects a sharp rise in capital spending, as the Centre spent Rs 3.5 lakh crore on capex, or 30.9 percent of the target until July, compared with 23.5 percent in the same period last year. This implies that nearly a third of the Rs 11.2 lakh crore full-year capex target has already been utilised in the first four months of the fiscal.
The Rs 2.1 lakh crore dividend transfer from the Reserve Bank of India helped contain the deficit, however, the tax revenue growth has been slower than last year. The Net tax revenue amounted to 23.3 percent of the annual target, well below the 27.7 percent achieved in the same period last fiscal.
The revenue slowdown partly reflects the income tax cut announced in the Union Budget 2025, which has reduced Centre's direct tax collections.
GST Rationalisation Ahead
Tax collections may face additional pressure in the months ahead as the government moves to implement a pre-Diwali GST bonanza, after a Group of Ministers last week approved the simplified two-rate GST structure, shifting 90 percent of items from the 12 percent and 28 percent slabs into the lower 5 percent and 18 percent brackets, respecively.
The GST Council is expected to take a final call on the proposal in early September.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
