Government intends to raise 8 trillion rupees by issuing dated securities
India is set to bridge a significant revenue gap of Rs 8 lakh crore in the first half of the 2025-26 financial year through a combination of strategic fiscal management, strong non-tax revenue, and debt issuance, including Sovereign Green Bonds (SGrBs).
The government has set a fiscal deficit target of 4.4% of GDP for the upcoming financial year, a decrease from the 4.8% recorded in the previous year, demonstrating a commitment to fiscal consolidation and responsible spending.
In the initial months of FY26, the fiscal deficit was kept low at Rs 13,163 crore, largely due to strong non-tax revenue inflows, with the Reserve Bank of India transferring a dividend of Rs 2.69 lakh crore to the government, an increase from last year's transfer of Rs 2.11 lakh crore.
The government also recorded a revenue surplus of Rs 1.83 lakh crore in the first two months and increased capital expenditure to Rs 2.21 lakh crore to support growth and infrastructure. Despite some shortfalls in revenue items like income tax and disinvestment receipts, the government's overall revenue intake is around 97.8% of the revised estimate, supporting fiscal sustainability.
To bridge the remaining gap, the government is expected to rely on market borrowings supplemented by instruments like SGrBs. SGrBs are a key part of India's borrowing plan, aimed at funding green projects while attracting investors focused on sustainable finance.
The exact interest rates for the borrowed funds and the repayment schedule have not been disclosed. The Indian government is also planning to establish a finance body for its net-zero goal, though specific details about this finance body have not been provided.
The total expenditure for 2025-26 is estimated at Rs 50.65 lakh crore, with the total receipts other than borrowings expected to be Rs 34.96 lakh crore. To finance the fiscal deficit, net market borrowings from dated securities are estimated at Rs 11.54 lakh crore, with the balance financing expected to come from small savings and other sources.
In conclusion, India will fund the Rs 8 lakh crore revenue gap in the first half of FY26 through a mix of strong RBI dividend transfers and other non-tax revenues, continued disciplined expenditure management, enhanced market borrowings including SGrBs for sustainable financing, and adherence to the fiscal deficit target while maintaining capital expenditure to sustain growth.
- The government, in its effort to address climate-change, is planning to use a portion of the borrowed funds for investing in green projects, as highlighted by the use of Sovereign Green Bonds (SGrBs).
- To align with its net-zero goal, the government is establishing a finance body, indicating a transition towards environmental-science-based projects and strategies in its budgeting.
- Though the Indian government is relying on market investments, particularly in SGrBs, for bridging the revenue gap, it maintains a firm focus on fiscal consolidation and responsible spending in the financial year 2025-26.
