Centre’s fiscal deficit hits 41.9% of FY27 target at ₹7.1 lakh crore in April-August

The Centre’s fiscal deficit stood at ₹7.1 lakh crore, or 41.9% of the full-year target, during the April-August period of FY2026-27, according to data released by the Controller General of Accounts (CGA) on Wednesday.

The fiscal deficit was at 38.1% of the Budget Estimates (BE) during the corresponding period of the previous fiscal year.

In absolute terms, the fiscal deficit, the gap between the government’s expenditure and revenue, stood at ₹7,10,249 crore during the first five months of FY26-27. The government has budgeted a fiscal deficit of 4.3% of GDP, or ₹16.96 lakh crore, for the full financial year.

Tax revenue, expenditure rise

The Centre’s net tax revenue stood at about ₹8.38 lakh crore during April-August, accounting for 29.2% of the full-year BE for FY26-27. In the corresponding period of the previous fiscal year, net tax revenue was 28.6% of the annual estimate.

Total expenditure during the first five months stood at about ₹20.78 lakh crore, or 38.9% of the full-year BE, compared with 37.1% during the year-ago period.

Aditi Nayar, chief economist at ICRA, said the fiscal deficit widened to ₹7.1 lakh crore during April-August, or 41.9% of the FY27 BE, from ₹6 trillion, or 39.4% of the provisional actuals, in the year-ago period. “The Government of India's (GoI's) fiscal deficit expectedly widened to ₹7.1 lakh crore during April-August or 5M FY27 (41.9% of BE) from ₹6.0 lakh crore (39.4% of PA) in the year ago period, led by a higher revenue deficit, as well as double digit capex expansion,” Nayar said.

ICRA expects the fiscal deficit to overshoot the FY27 Budget Estimate by around ₹1.3-1.4 lakh crore, amid an anticipated revenue shortfall from taxes and additional subsidy requirements for fuel and fertilisers. However, Nayar said the slippage could be partly absorbed through expenditure savings.

Revenue pressures, capex in focus

Nayar said the sharp increase in the Centre’s fiscal deficit in August was driven by the release of an additional tranche of tax devolution to states, compared with the release of a double tranche in July in 2025.

The Centre’s gross tax revenue grew 6.5% year-on-year during the first five months of FY27, despite a 23% contraction in excise duty collections following cuts in excise duties on petrol and diesel earlier in the fiscal. Most other major tax categories recorded double-digit growth during the period.

Based on the FY27 Budget Estimates and the provisional five-month trend, gross tax revenue would need to grow 10.9% year-on-year during September-March to meet the full-year target, Nayar said. She noted that this would require a 21% increase in income tax collections and a 31% rise in excise duty collections, which may be difficult to achieve. Higher-than-budgeted customs duty collections, aided by higher duties on gold and silver imports, could partly offset the shortfall.

On the expenditure side, the Centre’s capital expenditure declined around 30% year-on-year in August after rising about 60% during June-July. Despite the August decline, capex growth remained robust at 18% during the first five months of FY27.

Revenue expenditure grew 8% during the period, driven by a 24% increase in subsidy payouts, while interest payments declined around 3%. Excluding interest payments and subsidies, revenue expenditure grew 12.5% during the April-August period, according to ICRA.