Fiscal deficit in control despite public capex rise

Fiscal deficit at ₹5.73 trillion in April-September 2025, 36.5% of full-year target

- Rhik Kundu

India’s fiscal math is holding steady even as the government aggressively steps up public investment. Despite a 40% surge in capital expenditure (capex) in the first six months of FY26, helped by a low base, the Centre has managed to keep its fiscal deficit comfortably below the halfway mark of the annual target, aided by a windfall dividend payout of ₹2.56 trillion from the Reserve Bank of India (RBI).

India’s fiscal deficit for April-September 2025 stood at ₹5.73 trillion, accounting for just 36.5% of the budget estimate for the current financial year (FY26).

In the first half of the previous fiscal year, the deficit was 29.4% of the budgeted target, largely due to slow government spending as a result of elections. A figure above 50% in H1 of a fiscal indicates stress, and below it, comfort.

What has helped is that despite a 40% jump in capex and a modest 2.8% rise in gross tax collections, the central bank’s dividend payout plugged the gap, sending non-tax collections growth soaring 30.5% year-on-year (yo-y), reaching 79.94% of the Budget aim during the period.