India’s fiscal deficit expanded to 29.9 per cent of its full-year target by the end of July, according to the data from the Controller-General of Accounts (CGA). This deficit, the gap between government spending and revenue, amounted to ₹4.68 lakh crore in the April-July period of 2025-26.

The government aims to keep the deficit at 4.4 per cent of GDP, or ₹15.69 lakh crore, for the entire fiscal year.

Total government receipts through July were ₹10.95 lakh crore, with tax revenue contributing ₹6.61 lakh crore. Meanwhile, total expenditure reached ₹15.63 lakh crore, with capital expenditure seeing a 33 per cent increase compared with the previous year, which was affected by elections.

“A contraction in the personal income tax collections in July 2025, owing to the extension of the deadline to file taxes and an adverse base, pulled down the performance of gross tax revenues in the month, even as devolution to states maintained a robust pace,” said Icra’s chief economist Aditi Nayar.

Icra estimates that the Centre has fiscal space of around ₹50,000 crore, which could be used to push up capex beyond the FY26 budget estimate to provide support to exporters or absorb shortfalls in direct or indirect taxes.