India's fiscal deficit in the first eight months (April-November) of the financial year 2025-26 was estimated at Rs 9.8 lakh crore, or 62.3 per cent of the budget estimate for the full financial year, data released by the Controller General of Accounts on Wednesday showed.

The data showed that the government has stepped up its capital expenditure on big-ticket infrastructure projects such as highways, ports, and railways to spur growth and create more jobs in the economy. Capital spending touched 58.7 per cent of the full-year target, significantly higher than 46.2 per cent in the corresponding period last year. There was a 28 per cent increase in the government’s capex at Rs 6.6 lakh crore, up from Rs 5.1 lakh crore in the same period of the previous financial year.

While revenues have grown in absolute terms, the pace of collection slowed compared to the previous year, as the government has announced tax concessions for the middle class. Besides the GST rate cuts, which kicked in from September 22, are also beginning to reflect in the revenue figures. However, the reduction in taxes is playing a key role in accelerating growth in the economy.

Net tax revenue stood at Rs 13.94 lakh crore, or 49.1 per cent of Budget Estimates, compared with 56 per cent achieved during the same period last year.

Overall revenue receipts were at 55.9 per cent of the annual target, compared with close to 60 per cent a year earlier.

However, there was a silver lining in the sharp increase in non-tax revenue, which touched 88.6 per cent of the Budget Estimates during the first eight months of the current financial year, as the government's dividends from public sector undertakings (PSUs) surged during the current financial year due to the increase in profits.

Finance Minister Nirmala Sitharaman set the fiscal deficit target in the budget for 2025-26 at 4.4 per cent of GDP, which works out to Rs 15.7 lakh crore. This is part of the government’s commitment to follow a descending gliding path on the deficit to strengthen the country’s fiscal position. India’s fiscal deficit for 2024-25 stood at 4.8 per cent of GDP as part of the revised estimate.

A decline in the fiscal deficit strengthens the fundamentals of the economy and paves the way for growth with price stability. It leads to a reduction in borrowing by the government, thus leaving more funds in the banking sector for lending to corporates and consumers, which leads to higher economic growth.