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First quarter
In the first quarter of FY26, net tax revenues contracted by 1.7% to Rs 5.4 lakh crore, while non-tax revenues surged by 33% on year to Rs 3.73 lakh crore following the receipt of the higher-than-budgeted dividend from the Reserve Bank of India.
As the government accelerated spending to boost economic activity compared with the election-hit l year-ago period, capital expenditure surged by 52% on year to Rs 2.75 lakh crore while revenue expenditure expanded by 20% to Rs 9.47 lakh crore.
Tepid direct tax collections in June 2025 dampened the performance of gross tax revenues for the month, although this was driven by an adverse base, even as devolution to states continued at a robust pace. For the second month in a row, gross tax revenue (before devolution) declined in June. In June, gross tax revenue fell by nearly 5% on year.
POV’s
Commenting on the fiscal numbers, ICRA chief economist Aditi Nayar said the capex amounted to a healthy 25% of the FY26BE, and the same can now contract by as much as 3% in the remaining 9 months of FY2026 and still meet the target. The healthy YoY growth in the capex number in Q1 FY2026, is also likely to have supported investment demand, auguring well for the GDP growth print for the quarter, Nayar said.
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“Given the buffers on the receipts side, ICRA believes that the GoI could push up capex by ~Rs. 0.8 lakh crore in FY26 relative to the BE, boosting the headline figure to nearly Rs 12 lakh crore (vs. FY26 BE of Rs 11.2 lakh crore) and take the YoY growth in the same to a healthy 14.2%,” she added.