India’s fiscal deficit for the first eight months of the financial year 2025-26 has hit Rs 9.8 lakh crore, which is 62.3% of the full-year budget estimate, as per data from the Controller General of Accounts. The government has notably increased its capital spending on major infrastructure projects like highways, ports, and railways to boost economic growth and employment opportunities. Capital expenditure has reached 58.7% of the annual target, a significant rise from 46.2% in the same period last year, with a 28% surge in government’s capital expenditure to Rs 6.6 lakh crore.
While there has been growth in revenue collection in absolute terms, the pace has slowed compared to the previous year due to tax concessions for the middle class and GST rate cuts effective from September 22. The reduction in taxes is playing a crucial role in driving economic growth. Net tax revenue stands at Rs 13.94 lakh crore, equivalent to 49.1% of the Budget Estimates, lower than the 56% achieved in the corresponding period last year.
Overall revenue receipts have reached 55.9% of the annual target, down from nearly 60% in the previous year. However, there is a positive trend in the significant increase in non-tax revenue, hitting 88.6% of the Budget Estimates in the first eight months of the current financial year, driven by higher dividends from public sector undertakings (PSUs) due to increased profits.
Finance Minister Nirmala Sitharaman had set the fiscal deficit target for 2025-26 at 4.4% of GDP, amounting to Rs 15.7 lakh crore, as part of the government’s strategy to reduce the deficit gradually to strengthen the fiscal position. A lower fiscal deficit enhances the economy’s fundamentals, promoting growth with price stability, reducing government borrowing, and increasing funds available in the banking sector for lending to businesses and consumers, thereby fostering higher economic growth.
