Fiscal deficit widens as capex, subsidy spending rise in first five months

New Delhi: India's fiscal deficit—the gap between government expenditure and receipts—widened in the first five months of this financial year (FY27) as capital spending and outlays on major subsidies such as food and fertiliser increased.

According to the latest monthly accounts released by the Controller General of Accounts (CGA) on Wednesday, the fiscal deficit stood at ₹7.10 trillion, or 41.9% of the full-year budget estimate, during April-August of FY27.

This deficit was 38.1% of the annual target in the corresponding period of the previous year. At the end of July, it stood at 26.8% of the annual target.

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

The fiscal deficit is typically financed through borrowings.

The widening fiscal gap in August assumes significance as the government has cut its FY27 market borrowing by nearly ₹1.2 trillion and now plans to raise ₹7.86 trillion through dated government securities in the second half of the fiscal year.

The Centre now expects to borrow ₹15.995 trillion through dated securities during FY27, compared with ₹17.2 trillion estimated in the Union budget, according to the finance ministry’s borrowing plan released in consultation with the Reserve Bank of India (RBI) on 25 September.

Capex push

The latest data showed the fiscal deficit widened in the first five months of FY27 as government spending continued to gather pace, particularly on capital expenditure.

Total expenditure reached ₹20.78 trillion by August, equivalent to 38.9% of the full-year budget estimate, while total receipts stood at ₹13.68 trillion, or 37.5% of the annual estimate. These receipts include ₹8.38 trillion in tax revenue (net to Centre), ₹4.55 trillion in non-tax revenue, and ₹75,239 crore under non-debt capital receipts.

In percentage terms, revenue receipts stood at 36.6% of the budget estimate by August. Net tax revenue stood at 29.2% of the annual budget estimate of ₹28.67 trillion, while non-tax revenue reached 68.2% of the ₹6.66 trillion budgeted for the year.

According to the data, the Centre also received ₹75,239 crore through non-debt capital receipts, comprising ₹13,091 crore in loan recoveries and ₹62,148 crore under other receipts. Non-debt capital receipts were 63.5% 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.

The capex is progressing broadly in line with the fiscal-deficit trajectory as the government’s capital expenditure stood at ₹5.10 trillion, or 41.7% of the full-year budget estimate of ₹12.22 trillion, at the end of August, compared with 38.5% in the year-ago period. This indicates that the Centre has already executed a substantial part of its planned capital spending in the first five months, rather than fiscal deterioration being driven only by revenue expenditure.

Loans disbursed during the period stood at ₹1.39 trillion, or 50% of the ₹2.79 trillion budget estimate for FY27.

Interest payments amounted to ₹5.15 trillion, representing 36.7% of the ₹14.04 trillion budgeted for FY27. The corresponding figure a year earlier was 41.4% of the annual allocation.

Subsidy spending

Spending on major subsidies stood at ₹1.87 trillion during April-August, or 46% of the ₹4.11 trillion budgeted for FY27. This was higher than the 39% utilisation recorded in the corresponding period of the previous year.

Urea subsidy spending reached ₹77,522 crore, or 66% of the ₹1.17 trillion full-year allocation, compared with 51% utilisation during the same period last year.

Meanwhile, spending under the nutrient-based fertilizer subsidy stood at ₹25,617 crore, representing 47% of its ₹54,000 crore annual allocation, compared with 51% a year earlier.

Food subsidy expenditure stood at ₹83,510 crore, or 37% of the ₹2.28 trillion budget allocation, compared with 32% utilisation in the corresponding period of the previous year.

Petroleum subsidy expenditure was ₹388 crore, or 3% of the ₹12,085 crore annual allocation.

The Centre’s revenue deficit stood at ₹2.76 trillion by August, equivalent to 46.5% of the ₹5.92 trillion budget estimate for the full year. The corresponding figure was 37.9% 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 ₹7.06 trillion by August, equivalent to 42% of the full-year requirement.

Financing through securities against small savings stood at ₹1.12 trillion, or 29% of the annual estimate.

The National Small Savings Fund contributed ₹1.23 trillion during the period, while savings deposits and certificates accounted for ₹1.96 trillion.

Total financing of the deficit stood at ₹7.10 trillion, matching the fiscal deficit reported in the government accounts.