Key Highlights

• Fiscal deficit for April–October 2025 stands at ₹8.25 lakh crore

• This is 52.6% of the FY26 Budget Estimate, higher than 46.5% last year

• Capital expenditure rose 32% YoY and reached 55% of the full year target

• Tax revenues were soft at just 45% of the BE, down from ~50% last year

• Rising capex is boosting growth but widening the fiscal gap

India Fiscal Deficit Trends April to October 2025 Show Rising Spending Pressure

India has crossed the mid-point of FY26 with over half of its full year fiscal deficit target already used. For the April–October period, the fiscal deficit reached ₹8.25 lakh crore, which is 52.6% of the Budget Estimate. This is noticeably higher than the 46.5% utilisation seen during the same period last year.

A large part of this early fiscal stretch comes from a sharp rise in capital expenditure. The government has accelerated spending on infrastructure, transport, public investment and long term assets. Capex grew 32% year on year in the first seven months of FY26 and has already touched 55% of the annual target. This shows a clear intent to push growth through public spending.

However, revenue performance has not kept pace. Net tax receipts reached only 45% of their full year estimate compared to almost 50% last year. Tax concessions, including those under the newer tax regime, and slower growth in collections appear to be limiting revenue flows.

Broader Economic Context and Implications

The fiscal deficit target for FY26 is around 4.4% of GDP. With over half of the deficit consumed in seven months, the space for further discretionary spending is limited unless revenues improve from here.

This large capex drive is positive for sectors linked to infrastructure and manufacturing. It supports growth at a time when global conditions remain uneven. But the other side of the story is fiscal discipline. If revenues continue to lag, the government may face pressure to slow spending or find new revenue levers.

Macroeconomic conditions - such as inflation trends, interest rates and global risks - will influence how much flexibility the government has during the remaining part of the year.

What to Watch in the Coming Months

• Tax and non tax revenues: GST, corporate tax and income tax receipts will be key indicators. A rebound can ease deficit pressure.

• Pace of capex: Whether the government keeps the current speed or moderates it to stay within the fiscal target.

• Nominal GDP growth: Strong GDP growth can help maintain a stable debt to GDP ratio even if the deficit edges higher. A slowdown would worsen fiscal stress.

Final Word

The April–October FY26 fiscal data highlights a clear trend: strong government spending, especially on capex, is supporting India’s growth momentum. But soft tax revenues are tightening the fiscal space. To stay within the FY26 fiscal deficit target, the coming months will require either stronger revenue mobilisation or more careful spending.