Fiscal deficit reaches 41.9% of the full-year target by August; ICRA sees an overshoot

The Centre’s fiscal deficit for April-August 2026 stood at ₹7,10,249 crore, or 41.9% of the Budget Estimate (BE) for 2026-27, according to Controller General of Accounts (CGA) data released on 30 September. A year earlier, the deficit for the same five months was 38.1% of that year’s target.

The Budget for 2026-27 targets a deficit of ₹16,95,768 crore, or 4.3% of GDP, down from 4.4% in 2025-26. The deficit is the gap between what the government spends and what it earns, which it covers by borrowing.

A sharp rise in August

Until July the deficit was broadly in line with, or behind, last year’s pace. It was 18.2% of the BE at the end of June (17.9% a year earlier) and 26.8% at the end of July (29.9% a year earlier).

August changed that. The cumulative deficit went from ₹4,55,144 crore at the end of July to ₹7,10,249 crore at the end of August. Deccan Chronicle, reporting ICRA’s analysis, says the jump was driven by an extra instalment of tax devolution to states.

18.2%

26.8%

41.9%

Apr-JunApr-JulApr-Aug

Fiscal deficit as share of the 2026-27 target. Cumulative from April, % of Budget Estimate

Item	Value
Apr-Jun	18.2%
Apr-Jul	26.8%
Apr-Aug	41.9%

Where the pressure is coming from

Gross tax revenue grew 6.5% in April-August, according to ICRA’s analysis. The Budget assumes 8.0% growth for the full year. Excise collections fell 23% after the government cut excise duty on petrol and diesel on 27 March to cushion oil marketing companies from higher crude prices. Most other taxes grew at double-digit rates.

On the spending side, subsidies were up 24% and revenue expenditure 8%, while interest payments fell 3%. Revenue spending excluding interest and subsidies grew 12.5%.

For the full year, the Budget plans total spending of ₹53,47,315 crore against revenue receipts of ₹35,33,150 crore, with the gap met mainly by borrowing.

Capital expenditure was up 18% over the five months. It had surged 60% in June-July but fell 30% in August.

April-August 2026

• ₹7.10 lakh crfiscal deficit, 41.9% of BE (38.1% a year ago)
• 6.5%growth in gross tax revenue
• -23%change in excise collections
• 24%growth in subsidy spending

ICRA warns of an overshoot

Rating agency ICRA expects the deficit for 2026-27 to exceed the Budget Estimate by ₹1.3 to 1.4 lakh crore. It cites a shortfall in tax revenue and extra subsidy needs for fuel and fertilisers. It expects income tax and excise collections to fall short of budgeted levels.

ICRA also sees some offsets. Customs collections are running above budget because of higher duties on gold and silver imports, and small savings inflows are expected to exceed budgeted levels, which would give the Centre more room to borrow in the second half of the year.

Last year’s record

The government met its 2025-26 target. The deficit for that year was ₹15,19,169 crore, or 4.4% of GDP, according to provisional accounts reported on 1 June 2026. That was 97.5% of the Revised Estimate.

The Budget also set a medium-term goal of bringing central government debt down to 50% of GDP, give or take one percentage point, by 2030-31.