India’s fiscal deficit widens, tax growth slows in Q1FY26

India reported a higher fiscal deficit for the first quarter of financial year 2025-26 (FY26), driven by lower net tax receipts and higher interest payments, even as capital expenditure surged, official data showed on Thursday, July 31.

The fiscal deficit for the April-June quarter stood at ₹4.51 lakh crore, or 17.9% of the full-year target, compared with 8.4% in the same period last year, according to data from the Controller General of Accounts (CGA).

Net tax revenue receipts came in at 19% of the FY26 budget estimate (BE), down from 21.3% a year earlier, indicating slower growth in collections, particularly in direct taxes.

Interest payments rose to 30.2% of the budget target, up from 22.7% in Q1FY25, contributing to a rise in revenue expenditure year-on-year.

Despite the widening fiscal gap, the government accelerated capital spending, with capital expenditure touching 24.5% of the full-year aim, compared with 16.3% in the same quarter last year