India’s fiscal deficit for April to August widened to ₹7.10 lakh crore, driven by increased capital expenditure and subsidy payments, raising concerns over fiscal targets amid mixed revenue performance.
India’s fiscal deficit widened in the first five months of the financial year as the government kept up heavy capital spending and subsidy payments, even as some revenue streams lost momentum. Official data for April to August showed the gap at ₹7.10 lakh crore, equal to 41.9% of the full-year target, according to The Economic Times. That was larger than the shortfall in the same period a year earlier, when the deficit was about ₹6 lakh crore.
A key driver was expenditure on infrastructure and other investment-led spending. Capital expenditure rose about 18% from a year earlier, reflecting the Centre’s continued push on roads, railways and other public works. Subsidy outgo also increased sharply, climbing 24.6% to ₹1.87 lakh crore, with food and fertiliser subsidies accounting for much of the rise. Food subsidy alone increased by almost 30%, underscoring the strain on the budget from welfare commitments and commodity support.
Revenue performance was more mixed. Net tax collections reached ₹8.38 lakh crore in the period, while gross tax revenue rose only 6.5%, a pace that lagged spending growth. Excise receipts fell 23% as earlier cuts in petrol and diesel duties weighed on collections. The result was a budget position that improved on some fronts, but not enough to offset the stronger spending profile.
ICRA, the ratings agency, said the fiscal deficit could end up exceeding the Budget estimate by roughly ₹1.3 lakh crore to ₹1.4 lakh crore if current trends persist. It added that some of that pressure could be softened by savings on expenditure and better-than-expected inflows from small savings schemes, which help fund the government’s borrowing programme.
The Centre is still aiming for a fiscal deficit of 4.3% of gross domestic product in FY27, down from the broader medium-term effort to bring public finances onto a firmer path. The latest monthly numbers suggest that the second half of the year will be crucial, particularly if capital spending remains elevated and subsidy costs stay high.
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