Six months into financial year 2025-26 (FY26), the Centre’s books remain well balanced with a sharp focus on capital expenditure, which is now a little above 50% of the Budgeted Rs 11.1 lakh crore. But tax revenues remain lower than the recent trend with concerns that it may undershoot the full-year target.
The Centre’s fiscal deficit stood at Rs 5.73 lakh crore or 36.5% of the Budget estimate between April and September 2025, data released by the Controller General of Accounts on Friday revealed. The Centre’s fiscal deficit was lower at 29.4% of the BE in the first half of FY25, largely due to lower spending.
Between April and September 2025, the Centre’s capex rose to Rs 5.8 lakh crore or 51.8% of the full year target with frontloading of expenditure in key infra sectors of railways and roads. On a sequential basis, capital expenditure increased by 34.5% from Rs 4.31 lakh crore between April and August this fiscal. In all, the Centre spent Rs 1.49 lakh crore as capex in September, which was the second highest since April this fiscal.
Total expenditure remained on track and the Centre spent Rs 23.03 lakh crore in the first six months of the fiscal, which is 45.5% of the BE of Rs 50.65 lakh crore.
The revenue deficit however shrank to Rs 27,147 crore or 5.2% of the BE between April and September 2025 from Rs 1.98 lakh crore with a slower pace of revenue expenditure that amounted to Rs 1.72 lakh crore or 43.7% of the BE in the first half of the fiscal.
Total receipts amounted to Rs 17.3 lakh crore or 49.5% of the BE in the first six months of the fiscal year. However, net tax revenue came in lower at Rs 12.29 lakh crore or 43.3% of the BE.
Aditi Nayar, Chief Economist, ICRA said, “With an asking growth rate of over 21% in H2 FY2026 to meet the FY2026 BE, we are apprehensive that taxes will undershoot the budgeted target.”
Gross tax revenue rose by a muted 2.8% year -on-year during the first half of FY2026, with a 4.7% rise in income tax collections, and a subdued 1.1% growth in corporate tax collections. The increase in indirect tax collections was tepid at 3.2% in H1 FY2026, with a 5.2% contraction in customs duties and a 4-8% growth in GST and excise duty collections, she pointed out.
The cut in GST rates could also lead to a further reduction in collections although the government is confident that higher sales would compensate for the lower revenue.
