Central government’s fiscal deficit widened to Rs 7.10 trillion in the April-August period of this financial year, a near 19% jump from the figure reported in the year ago period, showed data released by the Controller General of Accounts (CGA) on Wednesday.
The gap between receipts and spending met through borrowings reported in the first five months of the current financial year stood at 42 per cent of Budget Estimates (BE). In the same period a year ago, it was at 38 per cent of the budget estimate.
The widening of the deficit follows a sharp jump in capital expenditure as well as an increase in spending on major subsidies, while revenue showed muted growth. However, strong disinvestment proceeds helped to limit the extent of fiscal deficit so far this year.
The government’s capital expenditure increased 18 per cent year-on-year to Rs 5.10 trillion in the first five months of the current financial year.
With this, the government has met nearly 42 per cent of its planned capital spending for FY27, compared to 38.5 per cent met in April-August period of 2025.
The spending on major subsidies shot up nearly 25 per cent annually to Rs 1.87 trillion in the April-August period, driven by a sharp surge of nearly 21 per cent in fertiliser subsidies.
Gross tax collections also showed modest growth of 6.5 per cent year-on-year to Rs 14.32 trillion.
Meanwhile, the government’s excise duty collections contracted nearly 23 per cent year-on-year to Rs 86,687 crore, as a result of a cut in special additional excise duty on petrol and diesel in late March. Centre’s gross tax revenue receipt needs to expand by 10.9 per cent annually during September-March for the government to meet BE for FY27, according to Icra.
“This warrants a 21 per cent growth in income tax collections, albeit on a low base, and a 31 per cent expansion in excise duty collections, both of which are unlikely to materialise, leading to a miss on these accounts,” Icra Chief Economist Aditi Nayar said.
“However, this would be partly offset by higher-than-budgeted collections on the customs duty front, aided by the duty hikes on gold and silver imports,” Nayar added. Customs duty collections were up 28 per cent annually, at Rs 1.07 trillion in the April-August period.
Given the revenue shortfall anticipated on taxes as well as additional subsidy requirements on fuel and fertiliser, Icra has estimated the fiscal deficit to overshoot the FY27 budget estimate by Rs 1.3-1.4 trillion. The government has projected the fiscal deficit for FY27 at Rs 16.96 trillion. “However, this could be absorbed by expenditure savings, which amounted to Rs 1.6-1.7 trillion during FY26,” Nayar said.
The government has projected its fiscal deficit to be at 4.3 per cent of GDP in FY27. Its fiscal space may draw some support from strong disinvestment receipts in the current year. In the April-August period, non-debt capital receipts more than doubled to Rs 75,239 crore from 31,970 crore in the corresponding period a year ago.
“Given that the economy is expected to grow by a little over 7 per cent in real terms and above 11 per cent in nominal terms, the fiscal deficit ratio should largely be contained in the region of 4.5-4.6 per cent this year, assuming some slippage in non-tax revenue due to the oil marketing companies not generating profit,” Bank of Baroda Chief Economist Madan Sabnavis said. “The positive facet is that the capex plan is on course while the other revenue expenditure is largely under control.”
