India's fiscal deficit for April-May 2026 reached ₹1.62 trillion, representing 9.6% of the full-year estimate for the financial year ending March 31, according to government data released by the Controller General of Accounts. This performance indicates the government's fiscal trajectory as it approaches the final months of the current financial year. The deficit showed significant improvement month-on-month, declining from ₹3.62 lakh crore in April, which had met 21.4% of the budgeted target. In the year-ago period, the fiscal deficit had reached only 0.8% of the annual target, highlighting the challenging fiscal environment this year. The latest data shows the deficit has widened more than 12 times compared to the same period last year, reflecting the mounting pressure on revenue collections.
Net tax collections during May reached ₹3.48 lakh crore, representing 12% of the yearly target, compared to 12.4% in the year-ago period. Within tax revenue, the government's excise duty collections fell nearly 20% to ₹2.12 trillion in April-May, reflecting cuts in the special additional excise duty on petrol and diesel in late March. The government had cut the excise duty on both fuels by ₹10 per litre. Revenue receipts, led by tax collections, reached 19.8% of the annual target in the first two months, standing at ₹6.99 lakh crore. Non-tax collection revenue has already reached more than half of its annual target at ₹3.50 lakh crore, with dividends and profits collection reaching 74% of the annual target at ₹2.89 lakh crore. Total receipts fell 2% to ₹7.19 trillion in April-May, accounting for nearly 20% of the BE.
Capital expenditure continued to surge, reaching ₹2.51 lakh crore or 20.5% of the FY27 target, compared to 26.2% of the annual target in the year-ago period. With this performance, the government has met nearly 21% of its capital expenditure target of ₹12.22 trillion for FY27 in just the first two months. Total expenditure during the first two months of this fiscal stood at ₹8.81 lakh crore, which is 16.5% of the FY27 estimated target, higher than 14.7% it had reached in the year-ago period. The Centre's revenue deficit in the April-May period narrowed to ₹68,985 crore from ₹1.82 lakh crore in April, indicating improved revenue management. Government's revenue expenditure also remained elevated, increasing 20% to ₹6.30 trillion during April-May, contributing to the overall expenditure rise.
For May specifically, the government recorded a fiscal surplus of nearly ₹2 trillion as the record-high surplus transfer of ₹2.87 trillion from the Reserve Bank of India raised non-tax revenue by nearly 13% in the month to ₹3.27 trillion. This marks the third consecutive year in May that the government has recorded a fiscal surplus due to a windfall dividend from the central bank. Despite the RBI surplus, the overall fiscal deficit for April-May remained elevated, highlighting the impact of weakening tax collections and expenditure pressures on the government's fiscal position.
Aditi Nayar, chief economist at ICRA Ltd, noted that the sharp dip in global energy prices following the easing of tensions in West Asia has improved the outlook for the government's fiscal position in FY27. "ICRA now expects only a marginal overshooting in the government's fiscal deficit vis-à-vis the target of 4.3% of gross domestic product (GDP) for FY27, as against the previous estimate of a 40-basis-point slippage, which assumed an average crude oil price of $95 per barrel for the financial year," she added. This improved outlook reflects the government's ability to manage fiscal pressures while maintaining its fiscal discipline framework, with the RBI surplus providing crucial support during challenging revenue collection periods.
