Federal Budget Deficit Reaches 17.9% Figure
The Centre's fiscal deficit for the first quarter of the 2025-26 fiscal year has increased compared to the same period last year, reaching 17.9% of the full-year target. This higher deficit is primarily due to a surge in expenditure, particularly capital expenditure, and slower growth in net tax revenues.
In the April-June period of 2025-26, the fiscal deficit stood at Rs 2,80,732 crore. This is more than double the Rs 1,36,000 crore recorded in the same quarter last year. The total expenditure during the first quarter of 2025-26 was at Rs 12,22,000 crore, or 24.1% of the Budget Estimates (BE).
Capital expenditure surged by 52% year-on-year to Rs 2,75,000 crore, reflecting a strong push in government investment spending. Revenue expenditure also rose by 20% to Rs 9,47,000 crore, with substantial amounts spent on interest payments (Rs 3,86,000 crore) and major subsidies (Rs 83,554 crore).
Net tax revenues declined by 2% to Rs 5,40,000 crore, pulling down total receipts despite a 33% jump in non-tax revenues, largely due to a record dividend transfer from the central bank. Experts believe that the higher-than-expected RBI dividend played a key role in containing the impact of increased capital expenditure during the quarter.
The Reserve Bank of India (RBI) transferred Rs 2,69,000 crore for FY25, a 27% increase from the previous year's transfer of Rs 2,11,000 crore. It is worth noting that in the year-ago period, the total expenditure was at 20.1% of the BE.
Despite the widened deficit in the first quarter, experts expect the Centre to meet its full-year fiscal deficit target of 4.4% of GDP. The Controller General of Accounts (CGA) released data on Thursday showing these figures.
In the first three months of the previous financial year, the fiscal deficit was at 8.4% of the Budget Estimates for 2024-25. The lower deficit in the previous year's first quarter was partly because capital and revenue expenditures had slowed down due to administrative delays around the general elections; these constraints were not present in 2025-26, allowing spending to accelerate.
[1] Centre's Fiscal Deficit at 17.9% of Full-Year Target in Q1 of 2025-26: CGA Data (Source: Business Standard) [2] Centre's Fiscal Deficit at 4.4% of GDP Target for 2025-26, Says Centre (Source: The Hindu) [3] RBI Dividend Transfer of Rs 2.69 Lakh Crore for FY25 Boosts Centre's Fiscal Position (Source: Livemint) [4] Centre's Fiscal Deficit in Q1 of 2025-26: A Closer Look (Source: Financial Express)
- The increased Centre's fiscal deficit in Q1 of 2025-26, reaching 17.9% of the full-year target, is primarily due to a surge in both capital and revenue expenditure in the business sector, as well as slower growth in net tax revenues.
- Despite the widened deficit in the first quarter of 2025-26, experts expect the Centre to meet its full-year fiscal deficit target of 4.4% of GDP, mainly owing to a key role played by the higher-than-expected RBI dividend in containing the impact of increased capital expenditure during the quarter.
