India's central government has reported a fiscal deficit of ₹9.76 trillion for the first eight months of the financial year 2025-26, according to the latest data from the Controller General of Accounts (CGA). This figure represents 62.3% of the full-year budget estimate, indicating the state of the nation's finances ahead of the final quarter.
Revenue Mix Shows Diverging Trends
The headline deficit number has been significantly influenced by a robust performance in non-tax revenue, which has provided a cushion to the exchequer. Collections from this stream reached ₹5.16 trillion, achieving a substantial 88.6% of the annual target. This performance surpasses the ₹4.27 trillion collected in the corresponding period of the previous fiscal year.
In contrast, tax revenue collection has been slower, standing at ₹13.9 trillion, which is only 49% of the full-year estimate. This marks a decline from the ₹14.43 trillion garnered in the April-November period of 2024-25. Specific levies like customs duty, GST compensation cess, and the securities transaction tax (STT) have seen a year-on-year decline.
Key Factors Impacting the Fiscal Math
Economists point to specific policy measures affecting revenue flows. The income-tax rebate announced in the February budget, which nullified tax liability for individuals earning up to ₹12 lakh annually, has impacted direct tax mop-up. Simultaneously, the ongoing rationalization of the Goods and Services Tax (GST) framework has influenced indirect tax collections.
On the expenditure side, a 28% annual increase in capital expenditure (capex) has contributed to the deficit. Capex utilization for the eight-month period stood at 59% of the budget estimate, higher than the 49% recorded a year ago. However, a contraction in central government capex was noted in November 2025, following a 21% decline in October-November after a strong September quarter.
Aditi Nayar, Chief Economist at Icra Ltd., highlighted the dynamics: "While net tax revenues contracted by 3.4% during this period, non-tax revenues expanded by 20.8%... We now anticipate a shortfall of ₹1.5 trillion in the Government of India’s gross tax revenues in the current fiscal relative to the FY26 budget estimate."
Subsidy Bill and Dividend Support
The government's subsidy expenditure presented a mixed picture. Total spending on subsidies reached ₹2.88 trillion, accounting for 75% of the annual target, slightly up from ₹2.79 trillion a year prior.
- Food subsidy outgo declined to ₹1.37 trillion from ₹1.51 trillion.
- Spending on fertilizers and petroleum rose significantly:
- Nutrient-based fertilizers: ₹46,377 crore (up 24% YoY)
- Urea: ₹96,027 crore (up 14.19% YoY)
- Petroleum: ₹8,628 crore (up 41.85% YoY)
A major positive for the fiscal position has been the better-than-expected dividend payout from public sector undertakings, state-run banks, and the Reserve Bank of India. The Centre received ₹3.39 trillion in dividends, exceeding the budget estimate of ₹3.25 trillion and reaching 104% of the target.
The Bigger Picture and Targets
The Centre's total receipts for April-November 2025 stood at ₹19.49 trillion, against total spending of ₹29.25 trillion. The government had estimated a fiscal deficit of ₹15.69 trillion or 4.4% of GDP for the full year 2025-26, as announced by Finance Minister Nirmala Sitharaman in the Union Budget. This follows a fiscal deficit of 4.8% of GDP in 2024-25, which was lower than the revised estimate of 4.9%.
The current year's deficit proportion (62.3% of target) is higher than the 52.5% (₹8.5 trillion) recorded in the same period of the previous fiscal year 2024-25, setting the stage for careful fiscal management in the remaining months to meet the annual target.
