Nine months into the financial year, the Centre’s finances appear well balanced, with good capital expenditure and a controlled fiscal deficit, although tax collections may be lower than expected. The data, which arrives days before the presentation of the Union Budget 2026-27indicates that the government is on track to meet the fiscal deficit target of 4.4% of GDP in FY26.

Analysts expect the fiscal deficit target for FY27 to be around 4.2% to 4.3% of GDP.

The Centre’s fiscal deficit stood at Rs 8.55 billion or 54.5% of the Budget Estimate (BE) between April and December 2025, according to data released by the Controller General of Accounts. Revenue deficit also remained below trend at Rs 1.13 trillion or 21.8% of BE in the first nine months of the fiscal.

While revenue stood at Rs 24.79 lakh crore, representing 72.5% of the full-year target for the period, tax revenue was lower. However, non-tax revenues, including healthy dividend income, made up for the shortfall. Total revenue was Rs 25.25 crore, or 72.2% of the full-year target.

Net tax revenue for the first nine months of the financial year was Rs 19.39 billion, or 68.3% of BE, with healthy growth in both direct taxes and customs duty collection. Non-tax revenue was Rs 9.39 billion, which is 92.6% of the full-year target. Dividends and profits had already surpassed the full-year target at Rs 3.5 lakh crore, against BE’s Rs 3.25 lakh crore.

Meanwhile, the Centre’s total expenditure was Rs 33.8 billion or 66.7% of the BE, with capital expenditure exceeding revenue expenditure. The Centre’s investment between April and December 2025 was Rs 7.87 billion, or 70% of the annual target of Rs 11.21 crore.

Aditi Nayar, ICRA’s chief economist, said the agency expects the potential loss on the tax side to be offset by higher-than-budgeted non-tax revenue and significant savings in revenue expenditure. “As a result, we do not expect the FY2026 RE to indicate a higher fiscal deficit than the FY2026 BE,” he said.

ICRA expects the Centre’s fiscal deficit to be pegged at 4.3% of GDP in FY2027, which would imply a net market borrowing number of Rs. 12.2 trillion, slightly higher than FY2026 levels.