New Delhi, Dec 23 (UNI): The fiscal position of both the Centre and the States remained resilient in the first half of 2025-26, with governments containing revenue expenditure while sustaining capital spending, according to a half-yearly review published in the Reserve Bank of India (RBI) Bulletin for December, 2025.
The review notes that the Centre collected nearly half of its budgeted receipts during April-September 2025, while keeping total expenditure below 50 per cent of the annual budget estimates.
This balance, supported by strong non-tax revenues and non-debt capital receipts, helped offset a moderation in tax collections.
The union Budget 2025–26 reaffirmed the government’s commitment to fiscal consolidation, with capital expenditure pegged at Rs 11.2 lakh crore, or 3.1 per cent of GDP.
Effective capital expenditure was budgeted higher at 4.3 per cent of GDP, reflecting a continued push towards infrastructure-led growth.
As a result, the Centre’s gross fiscal deficit (GFD) reached 36.5 perc ent of its budget estimate in the first half, higher than last year, largely due to accelerated capital spending.
On the revenue front, direct tax collections grew modestly, led by income tax, while indirect tax receipts were supported by strong goods and services tax (GST) collections in the first quarter.
Gross GST collections for the Centre and States together stood at Rs 11.9 lakh crore in the first half, marking a year-on-year growth of 9.8 per cent, aided by ongoing digital and compliance reforms.
State finances also showed stability, though with some pressure on receipts. States’ total revenue receipts grew by 6.3 per cent in the first half, weighed down by slower growth in State GST and a decline in grants from the Centre.
Despite this, States maintained their spending patterns, utilising about 38 per cent of their budgeted expenditure, while keeping capital expenditure growth marginally positive.
The consolidated fiscal deficit of States stood at 37.6 per cent of their budget estimates in the first half, slightly higher than a year ago, primarily due to subdued revenue growth. Nevertheless, States continued to prioritise capital outlays alongside steady revenue expenditure.
Overall, the RBI review highlights an improvement in the quality of public spending, with a lower revenue expenditure-to-capital outlay ratio for both the Centre and the States.
The report concludes that continued focus on capital expenditure, coupled with prudent fiscal management, will be critical for supporting medium-term growth while adhering to fiscal consolidation targets in the second half of the financial year.
