Fiscal deficit at 26.8% of FY27 target by July as capital spending gathers pace

New Delhi: India’s fiscal deficit stood at ₹4.55 trillion or 26.8% of the full-year budget estimate at the end of July, according to the latest monthly accounts released by the Controller General of Accounts (CGA) on Monday.

The deficit was 29.9% of the annual target in the corresponding period of the previous year. The deficit rose to 26.8% of the annual target by July from 18.2% at the end of June, as government expenditure continued to exceed receipts.

The Centre has budgeted a fiscal deficit of ₹16.96 trillion, or 4.3% of GDP, for FY27. It is counting on robust tax collections and higher non-tax revenues in the coming months to meet this target.

The fiscal deficit is the gap between the government’s total expenditure and receipts, excluding borrowings.

Buoyant collections keep deficit on track

The latest data shows India's fiscal position remained under control in the opening months of FY27, even as spending—especially capital expenditure—picked up speed. Fiscal health was also bolstered by total receipts tracking ahead of total expenditure relative to their annual targets.

The accounts showed that total expenditure reached ₹17.62 trillion by July, equivalent to 32.9% of the full-year budget estimate, while total receipts stood at ₹13.07 trillion, or 35.8% of the annual estimate.

The accounts also showed that the government received ₹13.07 trillion as total receipts during April-July, including ₹8.45 trillion in tax revenue (net to Centre), ₹4.23 trillion in non-tax revenue, and ₹39,136 crore in non-debt capital receipts. In percentage terms, revenue receipts stood at 35.9% of the budget estimate in July, compared with 31.1% in the corresponding period of the previous fiscal year.

Net tax revenue stood at 29.5% of the annual budget estimate of ₹28.67 trillion, while non-tax revenue reached 63.5% of the ₹6.66 trillion budgeted for the year.

According to the data, the Centre also received ₹39,136 crore through non-debt capital receipts, comprising ₹11,555 crore in loan recoveries and ₹27,581 crore under other receipts. Non-debt capital receipts were 33.1% of the ₹1.18 trillion budget estimate. The government had budgeted ₹36.52 trillion in total receipts for FY27, including revenue receipts and non-debt capital receipts.

Capital expenditure and subsidy outlays

Capex emerged as one of the key components of spending during the first four months of FY27. The Centre spent ₹4.51 trillion on capital expenditure, against a full-year budget allocation of ₹12.22 trillion. This represents 36.9% of the annual allocation, compared with 30.9% during the corresponding period of the previous year.

Loans disbursed during the period stood at ₹1.26 trillion, or 45.3% of the ₹2.79 trillion budget estimate for FY27.

Interest payments amounted to ₹4.27 trillion, representing 30.4% of the ₹14.04 trillion budgeted for FY27. The corresponding figure a year earlier was 35% of the annual allocation.

Spending on major subsidies stood at ₹1.54 trillion by July, or 37% of the ₹4.11 trillion budgeted for FY27. This was higher than the 30% utilisation recorded in the corresponding period of the previous year.

Despite lower crop sowing, urea subsidy spending reached ₹66,059 crore, or 57% of the ₹1.17 trillion full-year budget, up sharply from 35% utilization during the same period last year. Meanwhile, spending under the nutrient-based fertilizer subsidy rose slightly to ₹20,457 crore, representing 38% of its ₹54,000 crore annual allocation, compared to 35% a year earlier.

Food subsidy expenditure stood at ₹66,610 crore, or 29% of the ₹2.28 trillion budget allocation., compared with 27% utilisation in the corresponding period of the previous year. Petroleum subsidy expenditure was ₹388 crore, or 3% of the ₹12,085 crore annual allocation.

Revenue deficit and debt financing

The Centre’s revenue deficit stood at ₹43,645 crore by July, equivalent to just 7.4% of the ₹5.92 trillion budget estimate for the full year. The corresponding figure was 28.9% of the annual target in the previous year.

The Centre financed the fiscal deficit predominantly through domestic sources, the data showed. Domestic financing stood at ₹4.51 trillion by July, equivalent to 27% of the full-year requirement. Of this, market borrowings accounted for ₹3.49 trillion, or 27% of the ₹13.03 trillion budgeted for FY27. Financing through securities against small savings stood at ₹66,595 crore, or 17% of the annual estimate.

The National Small Savings Fund contributed ₹1.16 trillion during the period, while savings deposits and certificates accounted for ₹1.54 trillion. Investment in securities was negative at ₹57,315 crore. External financing stood at ₹4,507 crore, or 29% of the ₹15,385 crore budget estimate. Total financing of the deficit stood at ₹4.55 trillion, matching the fiscal deficit reported in the government accounts.