Govt’s capex up 40% in H1, fiscal deficit widens

THE CENTRE'S FISCAL deficit came in at 36.5% of the annual target in the first six months of 2025-26, compared with 29.4% in the year-ago period, largely due to a surge in capital expenditure while net tax revenues continued to contract.

- PRASANTA SAHU

The fiscal deficit stood at ₹5.73 lakh crore in H1 compared with ₹4.75 lakh crore in H1FY25. Its budgetary capital expenditure (capex) rose a steep 40% on year in H1FY26, partly helped by a 15% year-on-year fall seen in H1FY25 due to election-related lull. Capex rose by 31% on-year in September 2025.

Overall, the capex stood at ₹5.8 lakh crore or 51.8% of the annual target in H1 as against 39% in the year-ago period. Robust capex by the Centre is seen to have helped boost the Q2FY26 GDP. The economy expanded by a higher-than-anticipated rate of 7.8% in Q1.