Friday, 24 Oct, 2025
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By the end of August, ministries have spent about 37% of their FY26 budget, slightly ahead of last year’s pace, as the finance ministry begins pre-Budget talks amid slowing revenue and tight fiscal targets
The ministries have used up a little over a third of their FY26 spending plans by the end of August, as the Finance Ministry begins shaping next year’s Union Budget amid slowing revenue growth and a tight fiscal target. According to data from the Comptroller and Auditor General (CAG), ministries had collectively spent about 37 per cent of their budget estimates (BE) for FY26 by August. The figure, broadly in line with last year’s pace, comes as the government launches pre-Budget consultations to fine-tune the revised estimates (RE) for the current fiscal year and draw up proposals for FY27.
The Finance Ministry kicked off the inter-ministerial meetings on October 9, marking the start of months-long budget work that will culminate in the Budget presentation early next year. Analysts say these meetings help assess spending patterns in the first half of the year and determine whether reprioritisation is needed.
Despite revenue moderation, the Centre is confident of sticking to its fiscal deficit target of 4.4 per cent of GDP for FY26—an essential milestone on its path to bringing the deficit down to 4.1 per cent in FY27 and below 4 per cent by FY28, in line with its medium-term consolidation roadmap.
Uneven spending across ministries
The spending pattern reveals sharp contrasts across departments. Among the top spenders, the Ministry of Consumer Affairs, which oversees the food subsidy programme, had used 55 per cent of its Rs 2.16 lakh crore allocation, while the Ministry of Railways spent 52 per cent of its Rs 2.55 lakh crore outlay by August.
These ministries tend to front-load spending due to ongoing large-scale programmes such as the food subsidy disbursal and infrastructure works under the national rail modernisation plan.
At the other extreme, several key ministries lagged significantly. The Ministry of Petroleum and Natural Gas used just 3 per cent of its allocation, while the Ministry of Jal Shakti, responsible for major water and sanitation schemes, spent 4 per cent. The Ministry of Skill Development followed with 8 per cent utilisation.
The government has asked all departments to explain any major deviations between their BE and RE and to provide written justifications for any request exceeding 10 per cent growth in next year’s budget proposal. It has cautioned ministries against offering vague explanations such as “higher requirement” or “increased demand.”
That directive reflects a broader attempt to tighten fiscal discipline and prevent ministries from inflating demands toward year-end, a practice that often leads to inefficient spending surges in the final quarter.
Capital spending rebounds
One bright spot in the fiscal picture is the revival of capital expenditure (capex)—a key driver of economic growth. After losing momentum during the 2024 election period, capex utilisation rebounded to 38.5 per cent of the BE in the first five months of FY26, up from 27 per cent in the same period last year.
The Railways and Road Transport and Highways Ministry are leading the charge, spending 44 per cent and 43 per cent, respectively, of their annual capital allocations between April and August.
However, the momentum is far from uniform. The Ministry of Science and Technology has yet to spend a single rupee from its Rs 20,000 crore allocation, while the Department of Economic Affairs (DEA)—which oversees key financial-sector programmes—has utilised only 2 per cent of its Rs 46,613 crore capital outlay.
Balancing growth and prudence
As ministries prepare their FY27 proposals, the government faces the twin challenges of sustaining growth momentum and reining in deficits. The Finance Ministry has made clear that while capital spending will remain a priority, new schemes will need to demonstrate clear economic value and alignment with long-term development goals.
With public debt still around 82 per cent of GDP and interest payments eating up a significant share of revenues, the Centre’s fiscal headroom remains narrow. The upcoming Budget will be a test of how deftly New Delhi can sustain its infrastructure drive while keeping consolidation on track.
