Nine months into the financial year, the Centre’s finances appear well balanced, with healthy capital expenditure and a fiscal deficit under control, although tax revenues may be lower than expected. The data, which arrives a few days before the presentation of the Union Budget 2026-27indicates that the government is on track to achieve the fiscal deficit target of 4.4% of GDP in FY26.
Analysts expect the fiscal deficit target for FY27 to be between 4.2% and 4.3% of GDP.
The Centre’s fiscal deficit stood at Rs 8.55 lakh crore or 54.5 per cent of the budget estimate (BE) between April and December 2025, according to data released by the Controller General of Accounts. The revenue deficit also remained below trend at Rs 1.13 lakh crore or 21.8 per cent of BE in the first nine months of the financial year.
While revenue stood at Rs 24.79 lakh crore, accounting for 72.5 per cent of the full-year target over the period, tax revenue was rather lower. However, non-tax revenues, notably good dividend income, made up for the deficit. Total revenue stood at Rs 25.25 lakh crore, which was 72.2 per cent of the full-year target.
Net tax revenue during the first nine months of the financial year stood at Rs 19.39 lakh crore, or 68.3 per cent of the BE, with healthy growth in direct taxes and customs duty collections. Non-tax revenue stood at Rs 9.39 lakh crore, or 92.6 per cent of the target for the full year. Dividends and profits had already crossed the full-year target to stand at Rs 3.5 lakh crore, against a BE of Rs 3.25 lakh crore.
Meanwhile, the Centre’s total expenditure was Rs 33.8 lakh crore or 66.7 per cent of the BE, with capital expenditure exceeding revenue expenditure. The Centre’s investments between April and December 2025 were Rs 7.87 lakh crore, or 70 per cent of the full year target of Rs 11.21 lakh crore.
Aditi Nayar, ICRA’s chief economist, said the agency expects the potential tax shortfall to be offset by higher-than-expected non-tax revenues and significant savings on the tax expenditure front. “Accordingly, we do not expect the FY 2026 BE to indicate a higher budget deficit than the FY 2026 BE,” she said.
ICRA expects the Centre’s fiscal deficit to be pegged at 4.3 per cent of GDP in FY2027, which would result in a net market borrowing number of Rs. 12.2 trillion, a little higher than FY2026 levels.
