India’s central government reported a fiscal surplus in May despite capex picking up, as Reserve Bank of India delivered a bumper dividend for the year.
"Following the receipt of the higher-than-budgeted dividend from the RBI, the Government of India (GoI) reported a sizeable fiscal surplus in May 2025, which is sure to be a fleeting phenomenon, as expenditure picks up in the later months. This pulled down the fiscal deficit to just Rs. 132 billion or 0.8 percent of the FY2026 BE for the months of April-May 2025," said Aditi Nayar, chief economist, Icra.
The economy reported a fiscal deficit of Rs 13,163 crore for the first two months of the year, with RBI announcing a bumper dividend of Rs 2.69 lakh crore.
The RBI dividend stands higher than the Rs 2.56 lakh crore the government had budgeted to receive from RBI and public sector financial institutions.
Economists contend that the higher than expected dividend is expected to help lower the deficit further by 20-30 bps from the 4.4 percent target set by the government.
The dividend from the RBI stands 27 percent higher than the Rs 2.11 lakh crore transferred in the previous fiscal, when government had achieved a fiscal deficit target of 4.8 percent.
Capex also kept pace in May, according to data released on June 30, as spending remained 39 percent higher than the previous year’s number. In the first two months of the year, India has utilised 19.4 percent of capex target compared with 12.7 percent during April-May 2024.
Tax revenue performance was in line with last year's numbers with the country achieving 12.4 percent of the target of Rs 28.37 lakh crore.
"Given the buffers on the receipts side, ICRA believes that the GoI could push up capex by ~Rs. 0.8 trillion (lakh crore) in FY2026 relative to the BE, boosting the headline figure to nearly Rs. 12.0 trillion (vs. FY2026 BE of Rs. 11.2 trillion) and take the YoY growth in the same to a healthy 14.2 percent," Nayar added.
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!
