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India’s Fiscal Deficit Rises to Rs 5.98 Lakh Crore in April-August

India’s fiscal deficit touched Rs 5.98 lakh crore during April-August, which is 38.1% of the full-year target. This is significantly higher than 27% recorded in the same period last year, according to official data released on September 30.

Why Did the Fiscal Deficit Widen?

The widening fiscal deficit is driven by two major factors — a sharp rise in government capital expenditure and a slowdown in tax revenue collections.

  • Capital spending rose to Rs 4.32 lakh crore (38.5% of FY target) compared to Rs 3 lakh crore a year ago.
  • Tax revenue stood at Rs 8.1 lakh crore, only 28.6% of the FY target, against 33.8% in the previous year.
  • The dip in direct tax collection reflects the income tax cut announced in the Union Budget 2025.

Revenue Support and Shortfall

The government’s revenue deficit stood at Rs 1.99 lakh crore. A Rs 2.7 lakh crore dividend transfer from the RBI helped ease the revenue shortfall. Non-tax revenue also improved to Rs 4.4 lakh crore, up from Rs 3.3 lakh crore last year.

ADB Outlook on Fiscal Deficit

The Asian Development Bank (ADB) warned that India may struggle to meet its fiscal deficit target of 4.4% of GDP for FY26. However, ADB expects the deficit to remain below last year’s 4.7% of GDP, as strong spending will continue while tax growth remains weaker than projected.

“Tax revenue growth may be lower than expected, partly because GST cuts were not included in the budget while spending remains high. Nevertheless, the fiscal deficit is expected to be lower than last year’s 4.7%,” ADB noted.

Key Fiscal Deficit Data (April-August)

  • Fiscal deficit: Rs 5.98 lakh crore (38.1% of FY target) vs Rs 4.45 lakh crore last year
  • Total expenditure: Rs 18.8 lakh crore vs Rs 16.5 lakh crore last year
  • Total receipts: Rs 12.8 lakh crore vs Rs 12.2 lakh crore last year
  • Capital expenditure: Rs 4.32 lakh crore vs Rs 3 lakh crore last year
  • Non-tax revenue: Rs 4.4 lakh crore vs Rs 3.3 lakh crore last year

What Lies Ahead?

With revenue pressures due to tax cuts and higher spending commitments, the government faces a tough balancing act. Analysts expect fiscal discipline to improve later in the year, but the final outcome will depend on economic growth, tax buoyancy, and global conditions.

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