April-August fiscal gap widens to ₹7.1 lakh crore on higher capex, subsidy outgo
The Centre’s fiscal deficit rose to ₹7.1 lakh crore, or 41.9% of the FY27 target, by August, up from ₹6 lakh crore a year earlier, official data showed.
The fiscal deficit of the central government reached ₹7.1 lakh crore, comprising 41.9% of the year's target, at the end of August, according to official data published on Wednesday. This rise in deficit is attributed to higher capital expenditure and increased spending on subsidies, as compared to the fiscal gap of ₹6 lakh crore in the same period last year.
During the April-August period, the government's spending on major subsidies increased by 24.6% year-on-year, reaching ₹1.87 lakh crore from ₹1.5 lakh crore. The Centre's net tax revenue in the first five months of the fiscal amounted to ₹8.38 lakh crore, representing 29.2% of the budget estimate for 2026-27, which is slightly higher than the 28.6% in the previous year.
The finance minister had set a fiscal deficit target of 4.3% of gross domestic product, or ₹16.96 lakh crore, for the current fiscal year. In August 2026, the fiscal deficit climbed to ₹2.5 lakh crore, up from ₹1.29 lakh crore a year ago. The steep increase in August was primarily due to an additional tranche of devolution to states released in that month, stated Aditi Nayar, chief economist at ICRA.
The monthly accounts data revealed that total expenditure during the first five months of the fiscal stood at about ₹20.78 lakh crore, equivalent to 38.9% of the budget estimate, compared to 37.1% in the previous year. Revenue expenditure, which includes subsidies, grew to 38% in the first five months, up from 36.7% last year. This increase was mainly due to higher allocations for fertilizers, petroleum, and food distribution. Fertilizer subsidy expenditure rose to 60% of the total budget, up from 50% in the prior year.
Food subsidy expenditure increased by nearly 30% to ₹83,510 crore from ₹64,408 crore in the same period last year. Gross tax revenue grew by 6.5% year-on-year during the first five months of the fiscal, despite a sharp 23% contraction in excise duty collection due to earlier cuts on petrol and diesel. Nevertheless, most other taxes witnessed double-digit growth during this period.
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