Fiscal deficit higher at 62% between April-November as capex push outpaces tax inflows

Fiscal deficit higher than last year

• India's fiscal deficit hit 62.3 percent of annual target by November FY26
• Net tax revenue growth slowed, reaching only 49.1 percent of Budget Estimates
• Capital expenditure surged, boosting infrastructure and industrial output growth.

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India’s fiscal position tightened noticeably in the first eight months of FY26, with the Centre exhausting 62.3 percent of its annual fiscal deficit target by November, sharply higher than 52.5 percent in the same period last year.

Data released by the Controller General of Accounts shows the fiscal deficit reached Rs 9.76 lakh crore against the full-year target of Rs 15.69 lakh crore. The faster slippage reflects a combination of higher spending commitments and a slower-than-anticipated pace of tax inflows, partly due to income tax and GST cuts.

Revenue collections lag

While revenues have grown in absolute terms, the pace of collection has weakened compared with last year. Net tax revenue stood at Rs 13.94 lakh crore, or 49.1 percent of Budget Estimates, well below the nearly 56 percent achieved by the same point last year.

Overall revenue receipts were at 55.9 percent of the annual target, compared with close to 60 percent a year earlier.

A bright spot came from non-tax revenue, which reached 88.6 percent of Budget Estimates, supported largely by higher dividends and other administrative receipts.

Capex remains the growth anchor

On the spending side, the government’s determination to sustain growth momentum is evident in strong capital expenditure. Capital spending touched 58.7 percent of the full-year target, significantly higher than 46.2 percent in the corresponding period last year—underscoring the continued emphasis on infrastructure creation and long-term capacity building.

This investment-led push has begun to show up in activity indicators. Industrial output data released on December 29 showed India’s IIP growing at a 25-month high, with the construction goods sector expanding by around 12 percent, broadly aligning with the capex acceleration.

Deficit metrics under pressure

By contrast, revenue expenditure stood at 57.5 percent of the annual target, slightly lower than last year, suggesting some restraint in routine spending even as interest payments rose to 58.4 percent of their full-year projection.

The faster drawdown of fiscal space has translated into pressure on deficit indicators. The revenue deficit reached 68.2 percent of the annual target, up from 61.5 percent last year. The primary deficit—which excludes interest payments—rose sharply to 78.9 percent of the full-year target, compared with 41.8 percent in the same period a year ago, highlighting the strain from non-interest expenditure.