Centre’s Capex Jumps 54% in April–May

India’s capital expenditure in the first two months of FY26 saw a sharp 54% year-on-year rise, but the fiscal deficit remained largely in control at just over ₹13,000 crore — thanks in part to the record surplus transfer from the Reserve Bank of India (RBI).

Data released by the Controller General of Accounts (CGA) shows that the Centre’s total receipts stood at ₹7.32 lakh crore during April–May 2025, which is 21% of the full-year Budget Estimate (BE). This includes net tax collections of ₹3.5 lakh crore and non-tax revenues of ₹3.56 lakh crore — with tax revenues up 10% and non-tax revenues surging nearly 42% year-on-year.

The government also transferred ₹1.63 lakh crore to state governments as part of tax devolution — ₹23,720 crore more than in the same period last year.

On the spending side, the Centre incurred a total expenditure of ₹7.46 lakh crore (15% of BE), including ₹5.24 lakh crore on the revenue account and ₹2.21 lakh crore on capital expenditure.

According to Aditi Nayar, Chief Economist at ICRA, while the 54% growth in capital expenditure is significant, it comes off a low base. Adjusted for previous years, the growth is around 32% compared to April–May 2023. Still, capex has already reached 20% of the FY26 target, and even a marginal dip in the coming months would still ensure the government meets its annual goal.

"Given the buffers on the receipts side, the government could increase capital spending by ₹0.8 lakh crore beyond the Budget target, pushing total capex to ₹12 lakh crore and delivering a 14.2% annual growth,” she said.

Meanwhile, Devendra Kumar Pant, Chief Economist at India Ratings & Research (Ind-Ra), noted that shifting global and domestic dynamics make it too early to predict whether the Centre will stay within the fiscal deficit target for FY26. While slower tax revenue growth is a concern, he said strong non-tax receipts and capital inflows may help bridge the gap.

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