India's Fiscal Deficit Widens in Q1 2025

The central government's fiscal deficit has reached 17.9% of the full-year target by the end of June 2025, a significant increase from the 8.4% recorded in the same period last year, according to the Controller General of Accounts (CGA).

In absolute terms, the fiscal deficit stood at Rs 2.8 lakh crore for the April–June period of FY26. The government has set the fiscal deficit for the entire year at 4.4% of GDP, or Rs 15.69 lakh crore.

Revenue and Expenditure Highlights

By June, the government had received Rs 9.41 lakh crore, accounting for 26.9% of the Budget Estimates (BE) for 2025-26. This includes net tax revenue of Rs 5.4 lakh crore, non-tax revenue of Rs 3.73 lakh crore, and non-debt capital receipts of Rs 28,018 crore.

Transfers to state governments surged to Rs 3.27 lakh crore, an increase of Rs 47,439 crore from the previous year, driven by accelerated devolution of tax shares.

Investment and Growth Prospects

Total government expenditure in the first quarter reached Rs 12.22 lakh crore, or 24.1% of BE, with significant portions allocated to interest payments and subsidies. Aditi Nayar, Chief Economist at ICRA, noted the robust pace of devolution to states and the potential positive impact of increased capital expenditure on GDP growth.