India’s fiscal deficit H1 FY26 has reached a notable ₹5.73 lakh crore (₹5.73 trillion) in the first half of the 2025-26 financial year. This figure equates to about 36.5 % of the full-year target set by the government.
Key Figures & Context
- The full-year fiscal deficit target for FY26 is set at ₹15.69 lakh crore, or approximately 4.4 % of GDP.
- In H1 (April–September 2025), India’s total receipts stood at about ₹17.30 lakh crore, or ~49.5 % of the annual estimate.
- Expenditure during H1 was ~₹23.03 lakh crore, or ~45.5 % of the annual target.
- Tax revenue in H1: ~₹12.29 lakh crore. Non-tax revenue: ~₹4.66 lakh crore.
Why This Matters
- Fiscal Discipline Signals: Hitting 36.5 % of the full-year target in the first half is relatively moderate (below 50 %), which is seen as manageable. But it’s higher than in the same period last year (~29 %).
- Borrowing & Debt Trajectory: With the deficit at this level, the government will rely significantly on borrowing to meet the remaining ~63.5 % of its target in H2. This has implications for bond markets and interest rates.
- Revenue vs Expenditure Balance: Tax revenue growth is modest, but strong non-tax receipts (notably dividend from Reserve Bank of India) are helping bridge the gap. mint
- Capital Expenditure Push: The government is ramping up capex to support growth, which increases expenditure pressure even as it tries to keep the deficit in check.
- Risk of Slippage: While the first half looks under control, the remaining half of the fiscal year will be crucial — any drop in tax collections or spike in expenditure could push the full-year outcome off track.
What to Watch Going Forward
- Tax Revenue Growth: Whether tax collections accelerate in H2 to meet full-year expectations.
- Expenditure Control: How the government manages spending growth, especially on subsidies, capex and other committed items.
- Borrowing Costs: How the market reacts to the borrowing programme required to meet the deficit target.
- GDP Growth & Deficit Ratio: Since the target is expressed as 4.4 % of GDP, actual GDP growth will affect the denominator and the relative burden.
- Dividend & Non-Tax Revenue Sustainability: Whether windfall receipts (like RBI dividend) continue to plug gaps or whether reliance on them presents risk.
Conclusion
India’s fiscal deficit in the first half of FY26 — at ₹5.73 lakh crore and 36.5 % of the annual target — signals that the government is broadly on track, but the challenge remains for the second half of the year. Achieving the full-year 4.4 % of GDP target will depend heavily on revenue momentum, expenditure discipline and favourable growth conditions.
