The first four months of FY26 have started on a weak note. Combined government receipts are likely to have grown by a modest 7% YoY, with tax revenue declining in the last 2 months. This is largely due to the central government, as the state’s own tax revenues have continued to grow in the mid-single digits.
In contrast to this, the combined government expenditure has grown in the mid-double-digits, driven by a 25% growth in capital expenditure. Once again, the expenditure growth for the Centre has far outpaced the expenditure growth for the States.
Consequently, the combined government fiscal deficit has grown by over 50% YoY, with the Centre’s fiscal deficit growing almost 70% YoY. In contrast, the deficit for the States has grown by 37%. As we discuss below there are some transitory factors at play which are distorting the Centre’s finances.
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