India’s Fiscal Deficit Rises 12-Fold in April-May FY27 Despite RBI Dividend

In April-May FY2026-27, India’s fiscal deficit widened sharply to the ₹1.62 lakh crore and it showcases the weaker revenue collections despite receiving the record surplus transfer from the Reserve Bank of India (RBI). According to the data released by the Controller General of Accounts (CGA), the fiscal deficit has already reached to 9.6% of the full year r Budget Estimate (BE) of ₹16.96 lakh crore.

Fiscal Deficit Surge in April-May FY27

The centre’s fiscal deficit stood at around ₹1.62 lakh crore during the April-May and it compared with the just 0.8% of the annual target in the same period of the last year. The sharp increase was mainly driven by the softer revenue collections and the government expenditure continued at a robust pace.

Despite the higher deficit in the first two months, fiscal performance is generally influenced by the seasonal revenue and expenditure patterns in the financial year.

Revenue Collections Decline

Government revenues have also weakened during April-May.

Key highlights includes the,

• Revenue receipts declined to the ₹6.99 lakh crore and compared with the ₹7.08 lakh crore a year earlier.
• Total receipts also fell by around 2% to ₹7.19 lakh crore.
• Both the tax revenue and non-tax revenue has recorded a marginal year-on-year decline.

One of the major contributors to the lower tax collections was the decline in excise duty revenue.

Fall in Excise Duty Collections

Excise duty collections has been also dropped by nearly 20% to ₹2.12 lakh crore during the Fy27 April-May.

This decline also followed the government’s decision in the March 2026 to reduce the special additional excise duty on petrol and diesel by ₹10 per litre, and providing the relief to consumers but it lowers the tax revenue.

This reduction has significantly impacted the indirect tax collections during the initial months of FY27.

Government Maintains Strong Capital Spending

Despite the weaker revenues, the government has continued to investing heavily in infrastructure and asset creation.

Key expenditure figures includes the,

• Capital expenditure increased by over 13% to the ₹2.51 lakh crore.
• Nearly 21% of the FY27 capital expenditure target of ₹12.22 lakh crore was also achieved within the first two months.
• Revenue expenditure also rose by around 20% to ₹6.30 lakh crore.
• Overall government expenditure increased 18% year-on-year to ₹8.81 lakh crore.

The continued focus on the capital spending showcases the government’s strategy of to supporting the long-term economic growth through infrastructure investment.

RBI Dividend Provides Temporary Relief

In the Month of May 2026, the government has recorded the fiscal surplus of nearly ₹2 lakh crore and it is largely due to the RBI’s record surplus transfer of ₹2.87 lakh crore.

The dividend from RBI boosted non-tax revenue to ₹3.27 lakh crore during the month and it also helped to offset part of the revenue shortfall.

This marks the third consecutive year that the Centre has reported the fiscal surplus in May after a substantial RBI dividend.