Net tax collection declined, capex surged; fiscal deficit now 62% of BE

Net tax revenue (total collection minus devolution to States) during April-November period dipped to around ₹14 lakh crore 
| Photo Credit:
Jerome Maurice

With net tax revenue registering de-growth of over 3 per cent and capital expenditure surging over 28 per cent, fiscal deficit widened to over 62 per cent of the Budget Estimates during April-November period of 2025-26, data from Controller General of Accounts (CGA) showed. However, experts do not see fiscal deficit breaching the estimates as projected in the Union Budget of FY26.

According to data made public on Wednesday, net tax revenue (total collection minus devolution to States) during April-November period dipped to around ₹14 lakh crore as against ₹14.43 lakh crore. Interestingly, direct tax mop-up has improved, but rate rationalisation affected GST collections. Settlement of Integrated Goods & Services Tax (IGST) between Centre and States also impacted tax collection. Meanwhile, collection from Custom Duty declined as trade performance was not so encouraging.

Capital expenditure

On the expenditure front, the Centre continue to push capital expenditure and data showed that it surged by over 28 per cent during April-November period of FY26 compared to the corresponding period of FY25. Key contributions came from Railway (71 per cent of the Budget Estimates), Road (65 per cent of the Budget Estimates) and Capital Outlay on Defence Services (62 per cent of the Budget Estimates), besides others.

“Given the upfronting seen in H1 FY2026, capex needs to contract by 14 per cent during December-March FY2026 to remain within the FY2026 BE. However, we anticipate the GoI to enhance the allocation for capex somewhat, limiting the contraction in the last four months of the fiscal,” said Aditi Nayar, Chief Economist with ICRA. The Union Budget has provided ₹11.21 lakh crore as capital expenditure for the current fiscal.

Meanwhile, revenue expenditure saw an increase of just 2 per cent giving some comfort to overall fiscal situation.

According to Nayar, the first batch of supplementary demand for grants for FY26 entailed a modest net cash outgo of over ₹41,000 crore, mainly accounting for additional allocations for fertiliser subsidy, compensation to OMCs for under recoveries in domestic LPG and transfer to J&K. This could be comfortably offset by the expenditure savings on account of the non-interest non-subsidy revenue spending.

Overall, “ICRA expects the GoI’s revenue expenditure to print lower than the FY2026 BE. Also, we expect the potential miss on the taxes side to be offset by higher-than-budgeted non-tax revenues and sizeable expenditure savings on the revenue spending front. As a result, we do not anticipate a fiscal slippage at the current juncture,” she said.

Published on December 31, 2025