The government of India's fiscal deficit narrowed to Rs 12.5 lakh crore or 80.4% of the FY26 during April-February of FY2026 from Rs 13.5 lakh crore, or 86% of the actual in the year-ago period despite capex growing by 15% year-on-year during this period. A mere 1% growth in revenue expenditure during the period helped the government keep its fiscal deficit in check.
The total spending reached Rs 40.44 lakh crore, reaching 81.5% of the FY26 target. Of this, Rs 31.15 lakh crore was incurred on revenue expenditure, while Rs 9.29 lakh crore was on capital expenditure.
Interest payments continued to be a major component of revenue spending accounting for more than 26% of the spending at Rs 10.65 lakh crore, followed by major subsidies amounting to Rs 3.89 lakh crore.
The Centre’s collection of net tax revenue stood at Rs 21.45 lakh crore, up by 6.4% during the said period. The total collection of receipts stood at Rs 27.92 lakh crore till February 2026, accounting for 82% of the revised estimates (RE) for FY26, according to official data released by the Ministry of Finance on Monday. Non-tax revenue stood at Rs 5.81 lakh crore, while non-debt capital receipts were at ₹65,547 crore.
During the same period, the government transferred ₹12.66 lakh crore to states as their share of taxes, marking an increase of ₹85,837 crore compared to the previous year.
Despite the fiscal deficit declining y-o-y in the April-February period, ICRA economist Aditi Nayar says that they expect the fiscal deficit to print at 4.5% of GDP in FY2026, higher than the revised estimate of 4.3%, on the back of a downward revision in the nominal GDP numbers in the 2022-23 series vis-à-vis the 2011-12 series.
Besides, the recent excise duty cut on fuels is expected to result in a revenue loss of Rs. 1-1.2 lakh crore in FY2027, equivalent to 30 bps of the GDP. However, this is likely to be partly offset by the amount allocated towards the Economic Stabilisation Fund (ESF), says Nayar.