Quote on Fiscal Deficit by Aditi Nayar, Chief Economist, ICRA Ltd
Below the Quote on Fiscal Deficit by Aditi Nayar, Chief Economist, ICRA Ltd
"The Government of India's (GoI's) fiscal deficit amounted to Rs. 1.6 trillion or 9.6% of the FY2027 BE during April-May FY2027, as against just Rs. 0.1 trillion (0.8% of PE) in the year ago period. The fiscal expansion was driven by a 18% surge in total expenditure and the 1-2% contraction in net tax receipts and non-tax revenues.
The GoI’s gross tax revenues rose by a muted 1.8% YoY during 2M FY2027, led by the sharp 20% contraction in excise duty collections, following the paring of such duties on petrol and diesel. Besides, GST collections contracted marginally, albeit entirely on the back of IGST outflows as against sizeable inflows in 2M FY2026, even as CGST collections posted a healthy 22.8% expansion during this period. Corporate tax collections and customs duty collections posted a strong growth in 2M FY2027, even as income tax collections rose by a relatively sluggish 6.8%, much lower than the 17.7% growth required in FY2027 to meet the BE for the fiscal.
On the expenditure side, revenue expenditure surged by 20.1% in 2M FY2027, aided by the sharp rise in subsidies and interest payments; excluding these items, revex rose by a relatively lower, albeit healthy 14.5% during this period. Capital expenditure expanded by 13.4% during 2M FY2027, which will support GDP growth in that quarter.
Looking ahead, the sharp dip in global energy prices following the cooling of tensions in West Asia has improved the outlook for the GoI’s fiscal position in FY2027. ICRA now expects only a marginal overshooting in the GoI’s fiscal deficit vis-à-vis the target of 4.3% of GDP for FY2027, as against the previous estimate of a 40 bps slippage, which assumed an average crude oil price of $95/barrel for the fiscal."
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