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Key Points

According to ICRA, the Indian government has potential fiscal headroom to boost capital expenditure by Rs 0.8 trillion in FY2026. This increase is facilitated by a higher dividend payout from the RBI and the strength of the country's GDP. Despite a slight fiscal deficit above revised estimates, improvements in GDP and revenue have created this financial cushion. The robust economic indicators and increased receipts provide an opportunity for increased government spending on infrastructure and development.

Key Points: RBI Dividend Boosts India's FY26 Capex by Rs 0.8 Trillion

  • RBI dividend increases funding space for FY26 capex
  • FY2025 fiscal deficit at 4.8%
  • Capex potentially reaching Rs 12 trillion
  • Economic growth supports fiscal sustainability
3 min read

Govt will have extra Rs 0.8 trn for capex in FY26 because of higher dividend by RBI, robust GDP: ICRA

India's FY26 capex to rise by Rs 0.8 trillion, aided by RBI dividend and robust GDP - ICRA.

"FY2025 fiscal deficit contained at 4.8% of GDP; surplus enables Rs 0.8 trillion extra capex in FY2026. - ICRA"

New Delhi, June 3

The central government has extra space in the fiscal deficit to push up expenditure by at least Rs. 0.8 trillion in FY2026 relative to the Budget Estimates (BE), as the higher GDP and RBI dividend payout provide room for it, according to a report by ICRA.

The report highlighted various positive factors in the economy and added that the government could raise expenditure by Rs. 0.8 trillion in FY2026. If the full amount is used for capex, the total capex would rise to Rs. 12.0 trillion from the budgeted Rs. 11.2 trillion, raising its growth to 14.2 per cent, compared to 6.6 per cent currently.

ICRA said, "FY2025 fiscal deficit contained at 4.8 per cent of GDP; higher GDP, RBI dividend pay -out provides space for Rs. 0.8 trillion extra capex in FY2026."

The report noted that the Government of India's fiscal deficit stood at Rs. 15.8 trillion in FY2025, which was slightly higher than the Revised Estimate (RE) of Rs. 15.7 trillion.

This increase of Rs. 0.1 trillion was mainly due to higher-than-budgeted capital expenditure (capex) of Rs. 0.3 trillion and lower non-debt capital receipts of Rs. 0.2 trillion. However, this was partly balanced by a lower-than-expected revenue deficit of Rs. 0.4 trillion.

Despite this, the fiscal deficit was contained at 4.8 per cent of GDP, in line with the target for the year, thanks to a higher nominal GDP in the provisional estimates (PE) compared to the earlier forecast (FAE).

The report mentioned the positive outlook because in April 2025, the fiscal deficit was Rs. 1.9 trillion, about 12 per cent of the FY2026 BE, compared to Rs. 2.1 trillion in April 2024, which was 13 per cent of the FY2025 PE.

The decline came as a result of a drop in the revenue deficit to Rs. 0.5 trillion and a sharp increase in non-debt capital receipts. This helped absorb the 61 per cent year-on-year increase in capital spending during the month.

ICRA said the upward revision in the FY2025 GDP number supports the achievement of fiscal deficit and debt-to-GDP targets for FY2026.

Even though nominal GDP growth is expected to be lower at 9.0 per cent in FY2026 compared to the budgeted 10.1%, the fiscal deficit can still be held at 4.4 per cent of GDP. This also gives the government space for a small slippage of Rs. 300-350 billion.

The government also benefits from higher receipts, including Rs. 2.7 trillion as RBI dividend, which gives a cushion of Rs. 0.4 trillion.

There is also more room to raise excise duties on petrol and diesel, especially after the Rs. 2/litre increase in April 2025, due to softening global oil prices.

Additionally, as per data from the Controller General of Accounts (CGA), miscellaneous capital receipts in April 2025 have already reached about 46 per cent of the FY2026 BE of Rs. 470 billion.

So, as per ICRA, given these buffers, the GoI could push up expenditure by at least Rs. 0.8 trillion in FY2026 relative to the BE.

- ANI

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Reader Comments

R
Rahul K.
This is excellent news! The extra ₹0.8 trillion should be invested in infrastructure projects - roads, railways and renewable energy. Our economy needs this push to compete globally. Kudos to RBI for the dividend payout 👏
P
Priya M.
While the numbers look good, I hope the government doesn't forget about social sector spending. Some of this money should go to healthcare and education too. We need balanced development, not just physical infrastructure.
A
Amit S.
The fiscal discipline shown is commendable. Maintaining deficit at 4.8% despite challenges shows our economy is on the right track. But I'm concerned about the excise duty hike on fuel - common people are already struggling with inflation.
S
Sunita R.
₹12 trillion capex would be historic! But implementation is key - we've seen projects get delayed before. Hope the government ensures timely execution and prevents corruption in tendering processes. #TransparencyMatters
V
Vikram J.
Good to see RBI's strong dividend helping national development. But shouldn't we also focus on reducing debt-to-GDP ratio? We can't keep spending beyond our means forever. Some fiscal prudence would be welcome.
N
Neha P.
The 14.2% growth in capex is impressive! But I hope they allocate funds for digital infrastructure too - better internet in villages, tech education, and startup support. That's where future jobs will come from 💻

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