India's fiscal deficit widened sharply in April as revenue falls and spending rises

New Delhi: India’s fiscal deficit has soared ₹3.62 trillion in April, almost double from the previous year, driven by a sharp decline in revenue and a jump in expenditure in the first month of the current financial year.

The decline in sales followed the center’s decision in March to reduce excise duty on petrol and diesel ₹10 per liter each to protect consumers from increased global oil prices due to the war in West Asia, which resulted in a loss of income of nearly ₹14,000 million crowns.

The fiscal deficit in April, reflecting the difference between spending and revenue financed by borrowing, reached 21.4% ₹16.96 trillion budget target for FY27, according to the latest accounts released by the Comptroller General of Accounts (CGA) on Monday.

The fiscal deficit in April 2025 was ₹1.86 trillion.

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The deterioration was mainly caused by a sharp drop in government revenues. Total income excluding loans decreased by 23.8% year-on-year. ₹2.13 trillion in April from ₹2.79 trillion a year earlier. Revenues fell to ₹2.03 trillion from ₹2.57 trillion, while net tax revenue fell to ₹1.78 trillion from ₹1.90 trillion. Non-tax revenue witnessed an even sharper decline, falling to ₹24,293 million crowns ₹67,160 crore in April 2025, CGA data showed.

At the same time, government spending increased significantly. Total expenses increased by 23.5% year-on-year. ₹5.75 trillion in April from ₹4.66 trillion in the year-ago period. Revenue expenditure rose to ₹3.85 trillion from ₹3.06 trillion, while capital expenditure rose nearly 19% to ₹1.90 trillion from ₹1.60 trillion.

The government has set a budget deficit of 4.3% of gross domestic product, i.e. approx ₹16.96 trillion for FY27 and is expected to rely on stronger tax collection and non-tax revenue in the coming months to keep the deficit within the target.

Combination effect

April’s fiscal position reflects a combination of weaker revenue and projected spending at the start of the financial year. However, experts caution against reading too much into the first month’s data as direct tax collections, dividends from India’s central bank and public sector enterprises and GST settlements are unevenly spread over the year.

“The fiscal deficit was reduced in absolute terms to ₹15.2 trillion in 2025-26 ₹15.8 lakh crore in 2024-25, reflecting continued fiscal consolidation. This was achieved despite gross tax growth softening to 0.7 due to the reform of personal income tax and GST. Going forward, meeting the 2026-27 fiscal deficit target of 4.3% of GDP can be supported by an increase in tax revenue growth and an acceleration in capital expenditure growth, underscoring the government’s commitment to sustaining economic momentum,” said DK Srivastava, Senior Policy Advisor, EY India.

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Spending on food subsidies increased by almost 50% year-on-year. ₹21,600 crore in April from ₹14,423 crore in the same month last year. The expenditure represented about 9% of the allocated FY27 budget ₹2.28 trillion, underscoring the government’s continued focus on food security programmes. Expenditure on urea subsidies also increased by 57%. ₹19,796 million crowns ₹12,646 crore a year ago, with 17% of the annual allocation already utilized in the first month of the fiscal year.

A significant increase

The increase in capital spending is significant as the government continues to rely on public investment to support economic growth. The front-loading of capital spending in the early months of the fiscal year is generally viewed positively as it creates demand, garners private investment and supports infrastructure creation.

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A notable feature of the April accounts was the sharp rise in interest payments. The center spent ₹1.10 trillion in debt servicing during the month compared to ₹93,460 crore a year ago, reflecting the rising public debt burden. Interest payments alone accounted for more than 54% of earnings during April, compared to around 36% in the same month last year.

The revenue deficit widened sharply to ₹1.82 trillion from ₹49,001 crore a year ago. The primary deficit, which does not include interest payments, rose similarly ₹2.53 trillion from ₹92,872 million crowns.