India’s fiscal deficit stood at Rs 1.6 lakh crore in the first two months of the 2026–27 financial year (April–May), reaching 9.6% of the government’s full-year target, according to data cited by Business Standard.This marks a sharp increase compared to the same period last year, when the deficit was only 0.8% of the annual target.The rise has occurred despite a significant Rs 2.8 lakh crore surplus transfer from the Reserve Bank of India in May, which temporarily boosted government finances.On the revenue side, the government’s total receipts declined slightly to Rs 7.1 lakh crore, about 20% of the annual target.Both tax and non-tax revenues fell by around 1% year-on-year, reflecting weaker inflows.Within tax collections, excise duty saw a steep drop of nearly 20% to Rs 2.1 lakh crore, influenced partly by earlier cuts in fuel-related excise duties on petrol and diesel.Overall, revenue receipts slipped to Rs 6.9 lakh crore compared to Rs 7 lakh crore in the same period last year.At the same time, government expenditure increased significantly.Total spending rose 18% year-on-year to Rs 8.8 lakh crore, driven by higher revenue and capital expenditure.Revenue expenditure climbed 20% to Rs 6.3 lakh crore, while capital expenditure rose over 13% to Rs 2.5 lakh crore.The government has already utilised about 21% of its annual capital expenditure target of Rs 12.2 lakh crore in just two months, indicating front-loaded infrastructure spending.

Interestingly, in May alone, the government posted a fiscal surplus of nearly Rs 2 lakh crore due to the RBI dividend, which temporarily improved non-tax revenue by about 13% to Rs 3.2 lakh crore.

This is the third consecutive year that such surplus has been recorded in May, highlighting the importance of central bank transfers in supporting government finances.Overall, the data reflects a combination of rising expenditure pressure and subdued revenue growth in the early months of the fiscal year.