Quote on GoI Fiscal by Aditi Nayar, Chief Economist, ICRA Ltd
Below the Quote on GoI Fiscal by Aditi Nayar, Chief Economist, ICRA Ltd
The Government of India's (GoI's) fiscal deficit eased marginally to Rs. 4.6 trillion during April-July or 4M FY2027 (26.8% of BE) from Rs. 4.7 trillion (30.8% of PA) in the year ago period. The moderation was entirely driven by a sharp narrowing in the revenue deficit even as capex surged by ~30% during this period.
The GoI’s gross tax revenues rose by a healthy 11% YoY in 4M FY2027, led by a 20%-plus growth in direct taxes, amid a low base, and a 38% growth in customs duty collections aided by the hike in duties on gold and silver. The GoI’s net tax collections rose by a much healthier 28% in 4M FY2027, amidst a contraction in CTD to the states, as four tranches of devolution have been shared with the states in April-July FY2027 vs. five in April-July FY2026. With two tranches being shared in August 2026 vs. one in August 2025, the pace of growth will normalise and come closer to that of gross tax revenues.
Based on the FY2027 BE and the provisional 4M trends, the GoI’s GTR needs expand by 8.7% YoY in the remaining eight months of FY2027 to achieve the budgeted target of Rs. 44.0 trillion for the fiscal. While this seems modest compared to our current expectation of a double-digit nominal GDP growth for the fiscal, some shortfall is likely on account of union excise duty collections following the duty cut on petrol and diesel, and PIT collections (barring STT), which need to expand by ~15% during the remainder of the fiscal. These would be partly offset by higher-than-budgeted collections on the customs duty front, aided by the duty hikes on gold and silver imports.
Additionally, as per the DIPAM portal, the GoI has already garnered Rs. 0.56 trillion via disinvestments by August 31, 2026, suggesting that the target for miscellaneous capital receipts (FY2027 BE: Rs. 0.8 trillion) appears likely to be achieved.
On the expenditure side, the GoI’s revex rose by 7.8% in 4M FY2027, notwithstanding the 35% expansion in subsidies. Excluding interest payments and subsidies, revex rose by 11.4% during this period. Capex surged by a much faster 30% during 4M FY2027, amid a 50%-plus growth in June-July 2026.
While ICRA estimates the fiscal deficit to overshoot the FY2027 BE by ~Rs. 0.9-1.0 trillion, this could be comfortably absorbed by expenditure savings, which amounted to Rs. 1.6-1.7 trillion during FY2025-2026. This, along with a likely overshooting in small savings collections, would preclude the need to raise additional borrowings in H2 FY2027.
Additionally, the GoI has already pared the gross market borrowings (GMB) for FY2027 to Rs. 15.8 trillion from the budgeted Rs. 17.2 trillion, aided by switches of G-secs worth Rs. 1.2 trillion during February-April 2026 and buybacks of Rs. 257 billion during June-August 2026. Besides, another buyback worth Rs. 0.3 trillion is scheduled on September 3, 2026; if this goes through, this will further compress the GMB amount for the fiscal. While this is positive, movement in G-sec yields would remain contingent on expectations around monetary policy as well as global developments.
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