The country’s fiscal deficit for the first two months (April and May 2025) of FY26 narrowed sharply to Rs 13,163 crore, or just 0.8% of the annual target, according to the government data released on Monday. This is an improvement from the Rs 50,600 crore deficit—equivalent to 3.1% of the full-year estimate—recorded during the same period last year.
As per the financial ministry data, the total receipts between April and May rose to Rs 7.33 lakh crore. Last year, it was Rs 5.73 lakh crore for the same period. Gross tax collections stood at Rs 5.15 lakh crore, compared to Rs 4.60 lakh crore a year earlier. Non-tax revenue more than doubled to `RS 3.57 lakh crore, largely due to the RBI’s record Rs 2.69 lakh crore dividend transfer in May.
Total government expenditure increased to Rs 7.46 lakh crore from Rs 6.24 lakh crore last year. The data also noted that capital expenditure—a critical driver of infrastructure investment—rose sharply to Rs 2.21 lakh crore, up from Rs 1.44 lakh crore during the same period in FY25. Subsidy spending on food, fertilisers, and petroleum stood at Rs 51,252 crore or 13% of the revised annual allocation. This was marginally lower than 14% spent during the same period last year, indicating a more measured subsidy outgo.
For the month of May alone, the Centre posted a fiscal surplus of Rs 1.73 lakh crore, slightly above the Rs 1.60 lakh crore surplus in May 2024. Monthly receipts totalled Rs 4.54 lakh crore, while expenditure was Rs 2.81 lakh crore.
“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% of the FY2026 BE for the months of April-May 2025,” said Aditi Nayar, Chief Economist, ICRA Ltd.
“In the first two months of FY2026, tax revenues rose by 10%, while non tax revenues surged by 41.8% on a YoY basis. While revenue expenditure increased by 9.4%, capital expenditure surged by 54% on last year's election-curtailed base.Although the GoI’s capital expenditure surged by 54% in April-May 2025, this was on a low base, and the extent of the growth was somewhat lower at 32% as compared to the levels seen in April-May 2023. Nevertheless, the capex amounted to a healthy ~20% of the FY2026 BE, and the same can now contract by 1% in the remaining 10 months of FY2026 and still meet the target,” she added.