Quote on GoI Fiscal 30th October 2026 by Aditi Nayar, Chief Economist, ICRA Ltd
Below the Quote on GoI Fiscal 30th October 2026 by Aditi Nayar, Chief Economist, ICRA Ltd
"The Government of India's (GoI's) fiscal deficit rose to Rs. 7.1 trillion during H1 FY2027 (42.1% of BE) from Rs. 5.7 trillion (37.7% of PA) in the year ago period, reflecting both a surge in the revenue deficit and a robust expansion in capex.
The widening in the revenue deficit was driven by the 10% growth in revex, which considerably outpaced the muted 3.6% rise in revenue receipts in the first half of the fiscal. With the upsurge in H1, the GoI will need to curtail its revenue deficit in H2 FY2027 relative to the levels seen in the year ago period, in order to meet its target for the fiscal, which may prove challenging.
The GoI’s gross tax revenues rose by a subdued 6.1% YoY in H1 FY2027, led by the sharp fall in excise duty collections owing to the excise duty cuts on petrol and diesel, as well as the sluggish growth in personal income tax collections. Given the steep asking rates of ~28-38% for H2 FY2027, a miss on both these accounts seems likely, although this would be partly offset by excess collections on the customs duty front, which has expanded by a strong 16.5% in H1 FY2027.
On the expenditure side, the GoI’s capex declined by ~3% YoY in September 2026, after contracting by ~30% in August 2026. With this, capex growth has tapered to just 2.8% in Q2 FY2027 from 23.7% in Q1, which may weigh on the GDP growth outcomes. With capex rising by 12.7% in H1 FY2027, the asking rate for H2 stands at a considerable 16.2%.
While growth in revenue expenditure improved to 13.3% in Q2 FY2027 from 7.4% in Q1 FY2027, non-interest non-subsidy revex rose by just 1.3% in the quarter. Overall, revex expanded by 10% in H1 FY2027, implying that the same needs to rise by just 5.5% in H2 FY2027 to meet the BE for the fiscal.
With global energy prices remaining at elevated levels, ICRA expects an overshooting on the fertiliser and fuel subsidy front, as well as a shortfall on the receipts side, which is expected to result in a modest fiscal slippage of ~Rs. 1.3-1.4 trillion relative to the FY2027 target. However, this could be partly absorbed by expenditure savings, which had amounted to as much as Rs. 1.6-1.7 trillion during FY2025-2026. Additionally, a fiscal slippage may not necessarily manifest into higher borrowings, given that small savings inflows have surged by 54% YoY in H1 FY2027 and are set to overshoot the budgeted levels for FY2027."
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