The Centre remains confident of meeting its fiscal deficit target of 4.4% of GDP in FY26, even as the shortfall touched 36.5% of the full-year target in the first half (April–September) of 2025-26, govt sources tell Business Today TV.
Official data released by the Controller General of Accounts showed the fiscal deficit at Rs 5.73 Lakh crore, up from Rs 4.75 lakh crore in the same period last year.
Fiscal deficit is the gap between the government’s total expenditure and total receipts, excluding borrowings, which reflects how much the Centre needs to borrow to bridge its spending and income gap.
The higher deficit in the first half was largely driven by muted tax revenue growth and front-loaded transfers to states, alongside a sharp rise in capital expenditure (capex). The Centre’s capex rose 40% year-on-year to Rs 5.8 Lakh crore, exhausting nearly 52% of the full-year target, compared with 39% in the same period last year. This came on top of a subdued base in FY25, when capex had declined by about 15% due to the general elections.
Gross tax revenue rose by a modest 2.8% in H1FY26, with income-tax collections up 4.7% and corporate tax growth limited to 1.1%. Indirect tax collections rose 3.2%, with a 5.2% contraction in Customs duties partly offset by 4.8% growth in GST and excise collections.
Net tax revenue contracted 2.8%, reaching 43.3% of the annual target, due to both weaker receipts and higher devolution to states, which stood at Rs 8.3 Lakh crore, up 15.5% from last year.
However, non-tax revenue surged 30.5% to Rs 4.6 Lakh crore, buoyed by the Reserve Bank of India’s Rs 2.7 Lakh crore dividend. Officials said the strong non-tax inflows will help the government stay on course to meet the 4.4% fiscal deficit target for FY26.
