Fiscal deficit target for FY27 achievable, but slower nominal GDP growth may pressure fiscal space: Report
India's fiscal position remains comfortable in early FY27 months. Slower nominal GDP growth could pressure the fiscal deficit target. Government spending increased significantly, and capital expenditure rose nearly thirty percent. Tax collections remained strong, with income and corporate tax showing growth. Rising subsidy costs and disinvestment receipts will need close monitoring.
The Union Bank Research report suggests that India's fiscal deficit target for the fiscal year 2027 (FY27) remains attainable, but the potential for slower nominal GDP growth could impact the government's fiscal space. The research indicates that the fiscal deficit for the first quarter of FY27 was Rs 4.55 lakh crore, which is 26.8% of the annual budget estimate, lower than the revised estimate of Rs 4.68 lakh crore for the same period last year.
Despite an increase in government spending by 12.7% year-on-year to Rs 17.62 lakh crore, capital expenditure rose nearly 30% to Rs 4.51 lakh crore.
The report attributes the improvement in the fiscal deficit to strong tax collections, with income tax collections up by 24.3% and corporate tax collections rising by 20.8%. Customs revenue grew by 38.2% and GST collections increased by 16%. However, the research warns that rising subsidy costs, which increased by 35% to Rs 1.53 lakh crore, could pose a challenge.
The report emphasizes the importance of disinvestment receipts for maintaining fiscal discipline during the latter half of FY27. While the FY27 fiscal deficit target of Rs 16.96 lakh crore appears achievable based on the current data, it will likely depend on sustained tax growth and tight expenditure control in the coming months.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
