Fiscal Deficit at 80.4% of FY26 Target, Shows Government Data

India’s fiscal position appears to be on a steadier path in the current financial year, with the latest data indicating improved control over government finances compared to the previous year. According to figures released by the Controller General of Accounts, the Centre’s fiscal deficit stood at ₹12.52 lakh crore at the end of February, accounting for 80.4 per cent of the full-year target for 2025–26. This marks a notable improvement from 85.8 per cent recorded during the same period last year, signalling a more measured approach to public spending and borrowing.

The government has set a fiscal deficit target of ₹15.58 lakh crore for the ongoing financial year, equivalent to 4.4 per cent of GDP . The current trajectory suggests that the Centre is largely on track to meet this goal, provided spending remains disciplined in the final month of the fiscal year. Typically, government expenditure accelerates in the closing months, but the relatively lower deficit proportion this year reflects tighter fiscal management .

A key factor supporting this trend has been strong revenue generation. The Centre’s total receipts stood at ₹27.91 lakh crore by February-end, achieving about 82 per cent of the annual target. Of this, tax revenue contributed ₹21.45 lakh crore, reflecting sustained momentum in collections from goods and services tax, income tax, and corporate tax. Meanwhile, non-tax revenue , including dividends and interest receipts, added ₹5.8 lakh crore, further strengthening the government’s fiscal position.

On the expenditure side, total government spending reached ₹40.44 lakh crore during the April–February period, or 81.5 per cent of the budget estimate. While expenditure remains substantial, the pace of spending has been relatively controlled compared to the previous year. Importantly, the composition of expenditure continues to favour capital expenditure , which focuses on infrastructure development and asset creation, rather than purely revenue spending.

This emphasis on capital spending reflects a broader policy shift aimed at sustaining economic growth while maintaining fiscal prudence . Investments in infrastructure not only generate employment but also crowd in private investment and enhance long-term productivity. By prioritising such growth-oriented expenditure, the government is attempting to strike a balance between development needs and fiscal discipline.

The improving fiscal numbers also align with the Centre’s broader roadmap of fiscal consolidation . Over the past few years, the government has been gradually reducing the deficit after the pandemic-induced spike. The medium-term objective is to bring the deficit down further in the coming years, thereby stabilising public debt and improving macroeconomic stability .

However, some uncertainties remain. The fiscal math is sensitive to assumptions around nominal GDP growth, and any slowdown in economic activity could impact revenue collections and the deficit ratio. External factors such as volatile crude oil prices , geopolitical tensions, and global economic conditions could also influence government finances by affecting inflation and subsidy burden .

Despite these risks, the current data provides a positive signal to investors and policymakers. A lower and better-managed fiscal deficit helps maintain macroeconomic stability, keeps borrowing costs in check, and enhances investor confidence in the economy. It also provides the government with greater flexibility to respond to future economic challenges.

Overall, the Centre’s fiscal performance up to February suggests a careful balancing act between maintaining growth momentum and adhering to fiscal discipline. With revenues holding up and expenditure largely under control, India appears well-positioned to meet its fiscal deficit target for 2025–26, reinforcing confidence in its economic management.