The deficit in April-May in the previous fiscal was 3.1% of the target. In absolute terms, the fiscal gap stood at ₹13,163 crore till May, against ₹50,615 crore a year before, showed the data. However, in May alone, the Centre saw a fiscal surplus of ₹1.73 lakh crore, up from ₹1.59 lakh crore.
This is going to be a “fleeting phenomenon”, as expenditure will pick up in subsequent months, said ICRA chief economist Aditi Nayar.
Experts said the Centre’s target of reining in its deficit at 4.4% of gross domestic product in 2025-26 seems all the more realistic now.
Tax collection increased 10% in April-May from a year before to ₹3.51 lakh crore, the data showed, a tad lower than the budgeted annual growth rate of 11%. However, non-tax revenue surged 41.8% during this period to ₹3.57 lakh crore, boosted by the record ₹2.69 lakh crore dividend by the Reserve Bank of India (RBI).
India Ratings chief economist DK Pant said overall revenue growth in the first two months was 24%, more than double the budgeted 10% growth for the entire fiscal. “This was due to strong growth of non-tax revenue, mainly due to the RBI dividend and non-debt creating capital receipts (asset monetization and disinvestment),” he said.
Meanwhile, capital expenditure jumped 54% in April-May to ₹2.21 lakh crore, albeit on a curtailed base due to general election last year. Still, it was about a fifth of the full-year target and 32% higher than the level seen in the first two months of the previous fiscal.
Revenue expenditure in the first two months increased 9.4% to ₹5.25 lakh crore and total spending by 19.7% to ₹7.46 lakh crore.
“Given the buffers on the receipts side, ICRA believes that the Centre could push up capex by ~₹0.8 lakh crore in FY26 relative to the BE (budget estimate), boosting the headline figure to nearly ₹12 lakh crore (versus the BE of ₹11.2 lakh crore) and take the year-on-year growth in the same to a healthy 14.2%,” ICRA’s Nayar said.
