Synopsis : India’s fiscal deficit for April–May FY26 narrowed significantly to just 0.8% of the annual target, reflecting strong revenue collections and controlled subsidy spending. A surge in tax and non-tax revenues, including the RBI’s record dividend, helped deliver a rare fiscal surplus in May.
India’s fiscal deficit for the first two months of FY26 narrowed sharply to Rs 13,163 crore, just 0.8% of the full-year target, according to government data released on Monday. This marks a significant improvement from Rs 50,600 crore, or 3.1% of the annual target, recorded during the same period last year, reflecting strong revenue inflows and measured spending.
The finance ministry reported total receipts of Rs 7.33 lakh crore during April–May FY26, a sharp rise from Rs 5.73 lakh crore a year ago. Gross tax collections increased to Rs 5.15 lakh crore from Rs 4.60 lakh crore, while non-tax revenue more than doubled to Rs 3.57 lakh crore, driven by the RBI’s record dividend transfer of Rs 2.69 lakh crore in May.
Government expenditure rose to Rs 7.46 lakh crore from Rs 6.24 lakh crore in the previous year, with capital expenditure—a key driver for infrastructure growth—rising sharply to Rs 2.21 lakh crore, up 54% from Rs 1.44 lakh crore in FY25’s comparable period. Meanwhile, subsidy spending on food, fertilisers, and petroleum stood at Rs 51,252 crore, lower than last year’s share, indicating a more controlled subsidy approach.
For May alone, the Centre posted a fiscal surplus of Rs 1.73 lakh crore, slightly higher than the Rs 1.60 lakh crore surplus recorded in May 2024. Monthly receipts stood at Rs 4.54 lakh crore, while expenditure was recorded at Rs 2.81 lakh crore.
Aditi Nayar, Chief Economist at ICRA Ltd., noted that the fiscal surplus, bolstered by the RBI dividend, is likely to be a temporary phenomenon as expenditure picks up in subsequent months. She highlighted that tax revenues rose by 10% and non-tax revenues surged by 41.8% on a year-on-year basis, while capital expenditure surged by 54%, amounting to ~20% of the FY26 target within the first two months.
The data reflects India’s strengthened fiscal position, providing headroom for continued infrastructure investment while maintaining fiscal discipline amid a complex global environment.
Disclaimer : This article is for informational purposes only and does not constitute financial or investment advice. Please consult a qualified advisor before making investment decisions.
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