Centre’s domestic financing nearly doubles to ₹3.6 trillion in April, easing capital spending pressure

The Centre mobilised ₹3.6 trillion through domestic financing in April, nearly double the ₹1.90 trillion it raised in the same month last year, marking a strong start to the funding programme for the new fiscal year and providing a cushion for planned expenditure on infrastructure, welfare schemes and other development projects.

Data released by the Controller General of Accounts (CGA) also showed external financing turning positive at ₹1,940.59 crore during the month, against negative ₹3,836.01 crore in April 2025, indicating an improvement in net external flows.

The April financing data comes against the backdrop of the Centre's fiscal deficit target of 4.3% of GDP for FY27, lower than the revised estimate of 4.4% in FY26, as it continues its fiscal consolidation plan while maintaining capital-expenditure-led growth. In absolute numbers, the FY27 fiscal deficit is pegged around ₹16.96 trillion.

The financing pattern suggests that India continues to fund its fiscal deficit largely through domestic resources rather than external debt, insulating public finances from global market volatility and exchange-rate risks.

Small savings, big relief

The data showed a significant portion came from the National Small Savings Fund (NSSF), which generated net financing of ₹83,464 crore in April, up from ₹69,851 crore in April 2025. Within the NSSF, Public Provident Fund (PPF) collections stood at ₹38,787 crore, while income and expenditure of the fund contributed ₹9,641 crore.

The strong inflows into small savings instruments indicate that households continue to park money in government-backed schemes, providing the Centre with a stable and predictable source of financing. Such inflows help reduce dependence on volatile external funding and support fiscal stability.

The government's ‘others’ category under domestic financing emerged as the largest contributor, accounting for ₹1.50 trillion in April, significantly higher than ₹1.06 trillion in April 2025. The 'others' category includes residual domestic financing items not separately disclosed under major borrowing and savings heads in the CGA statement.

Meanwhile, market borrowings recorded a net outflow of ₹5,129 crore during April, compared with net borrowings of ₹63,130 crore in April 2025. Securities issued against small savings also recorded a net outflow of ₹36,628 crore.

The lower reliance on market borrowings at the start of the fiscal year could help ease pressure on government bond yields and leave more room for private-sector credit demand, although borrowing requirements are expected to rise as the year progresses.

State provident funds contributed ₹1,872 crore, while special deposits from non-government provident funds, insurance corporations and other institutions registered a net outflow of ₹167 crore.

‘Comfortable position’

Economists see the financing pattern as a sign of the government's comfortable funding position at the start of FY27. Dr Dharmveer, assistant professor of economics at the Delhi School of Economics, said, “Strong availability of domestic resources reduces the risk of expenditure compression later in the year and supports economic activity through continued public spending. The figures also underline India's reliance on domestic savings rather than external debt to finance its fiscal deficit, insulating public finances from global market volatility and exchange-rate risks.”

The data also showed that the government did not resort to ways and means advances from the Reserve Bank of India during April, with the outstanding position remaining at zero, the same as a year earlier.

The absence of RBI liquidity support also signals a comfortable cash position and prudent fiscal management at the start of FY27. Combined with strong domestic financing and healthy small savings inflows, it indicates that the Centre entered the new fiscal year with adequate resources to fund its expenditure commitments while keeping reliance on short-term financing under control.

D.K. Srivastava, chief policy advisor at EY India, noted a significant shift in how the government funded its fiscal deficit this April compared to the same month last year. “To a limited extent, this excess was financed through contributions from the NSSF. These patterns are likely to largely balance out in the subsequent months of the fiscal year, as both tax and non-tax revenues are subject to seasonal variations,” he said. The major change, however, comes from the redemption of surplus cash held with the RBI in the form of special/intermediate treasury bills, he added.