New data reveals a significant widening of the Indian government's fiscal deficit, with revenue collections lagging behind expenditure, partly due to recent cuts in Goods and Services Tax (GST) rates. The fiscal shortfall for the first eight months of the current financial year has crossed a crucial threshold, raising questions about the full-year budgetary math.
Key Deficit Figures Point to Revenue Pressure
According to the latest figures released by the Controller General of Accounts (CGA), the fiscal deficit for April-November 2025 stood at 62.3% of the full-year target. This target is set at Rs 15.69 lakh crore, which equates to 4.4% of the country's Gross Domestic Product (GDP). The current eight-month deficit level is notably higher, by almost 10 percentage points, compared to the same period last year.
The trend shows a consistent climb. In the preceding April-October period, the deficit was 52.6% of the annual goal, which itself was about 6 percentage points above the level seen in the first seven months of the previous fiscal year (FY25). This progression indicates increasing pressure on the government's finances as the year advances.
GST Impact and Expert Analysis
Economists point directly to the tax collection front, particularly GST, as a primary concern. Madan Sabnavis, Chief Economist at Bank of Baroda, explained that the rising deficit signals that while government spending is aligned with last year's patterns, "revenue collection has lagged." He highlighted that tax revenue has reached only 49% of the budgeted amount so far, compared to 56% at the same time last year.
"The impact of GST is hence visible here," Sabnavis noted. He added that some recovery is expected in December due to advance tax payments from corporations, but the strain from lower GST mop-up is clear in the monthly data. The sweeping GST rate cuts, which took effect on September 22, have started to reflect in the indirect tax numbers.
For instance, GST collections for November—which reflect economic activity in October—amounted to Rs 1.7 lakh crore, nearly flat compared to Rs 1.69 lakh crore in November 2024. When including the compensation cess, the total was down 4% year-on-year at Rs 1.75 lakh crore.
A Closer Look at Revenue and Expenditure
The detailed CGA data paints a picture of contrasting trends. On the revenue side, total receipts for November were 13% lower than the same month last year. For the April-November cumulative period, revenue was up a modest 3%. The Centre's net tax revenue fell by 14% in November and was down 3% for the eight-month period.
This is against a Budget estimate projecting a 14% growth in net tax revenue to Rs 28.37 lakh crore for the full FY26. The shortfall in GST and customs duties (down 7% cumulatively) has been partially offset by a 9% rise in excise duty collections and a robust 21% jump in non-tax revenue. This non-tax boost is largely attributed to the record Rs 2.69 lakh crore dividend transferred by the Reserve Bank of India to the government in May 2025.
On the expenditure front, the government's total spending in November rose by 12% year-on-year. Cumulative spending for April-November reached Rs 29.26 lakh crore, which is 7% higher than the previous year. However, the composition of this spending has shifted. While revenue expenditure (covering items like salaries and interest payments) drove the November increase, capital expenditure (capex) was 14% lower in that month. For the eight-month period, capex remains strong, up 28% at Rs 6.58 lakh crore.
The government's full-year spending estimate, as per the Union Budget for FY26, is Rs 50.65 lakh crore. With the deficit at 62.3% of the target with four months remaining, all eyes will be on the upcoming interim budget and the final monthly GST collection data for December to gauge the full trajectory of the fiscal year.
