Slowing tax collection and a robust pace of expenditure pushed up the Centre’s fiscal deficit for the first half of 2026-27 to 42 per cent of the Budget Estimate (BE) against nearly 37 per cent in the corresponding period last year.
The data released by the Controller General of Accounts (CGA) on Friday showed in April-September 2026-27 (H1FY27), the Centre’s fiscal deficit grew nearly 25 per cent year-on-year (Y-o-Y) to ₹7.14 trillion.
The government’s expenditure increased nearly 11 per cent Y-o-Y to ₹25.50 trillion because revenue expenditure, led by subsidy spending, rose 10 per cent Y-o-Y to ₹18.95 trillion.
The government exhausted 54 per cent of its BE in paying for major subsidies, including 73 per cent of the target on urea and 62 per cent of that on nutrient-based fertilisers.
Economists are of the view that the government may find it difficult to meet the fiscal-deficit target of 4.3 per cent of gross domestic product in FY27.
“The widening revenue deficit considerably outpaced the muted 3.6 per cent rise in revenue receipts in the first half of the financial year … The government needs to curtail its revenue deficit in the second half relative to the levels seen in the year-ago period in order to meet its target for the fiscal, which may prove challenging,” said Icra Chief Economis.
Capital expenditure (capex) jumped 13 per cent Y-o-Y to ₹6.55 trillion. However, for September, it was down 3 per cent. This was the second consecutive month of decline in capex after a sharp contraction of 30 per cent seen in August.
The fall in capital spending recorded in the last two months may weigh on India’s economic growth, Nayar pointed out.
With this capex increase, the government has met nearly 54 per cent of its BE for FY27.
“The asking rate for H2 stands at a considerable 16.2 per cent,” she said.
Revenue receipts, including both tax and non-tax revenues, inched up about 4 per cent to ₹17.57 trillion.
Net tax collection increased nearly 4 per cent Y-o-Y to ₹12.76 trillion in H1. The government met nearly 45 per cent of the BE for net tax collection in H1FY27. Gross tax collection rose 6 per cent to ₹19.80 trillion.
The slowdown in tax mop-up was led by a 22 per cent Y-o-Y contraction in Union excise duty collection to ₹1.08 trillion. The government had slashed special additional excise duty on petrol and diesel by ₹10 per litre in late March amid rising prices of crude oil after the war in West Asia started.
Growth in income-tax collection was also in single-digits, about 7 per cent, at ₹6.31 trillion.
Economists caution that the fall in excise-duty collection and subdued increase in income-tax mopup may lead to the government missing the BE for both. However, the miss can be offset by Customs duty, up nearly 17 per cent up Y-o-Y in H1.
“Given the steep asking rates of 28-38 per cent for H2FY27, a miss on both these accounts (excise duty and income tax) seems likely, although this would be partly offset by excess collection in Customs duty,” she said.
Receipts rose 6 per cent Y-o-Y to ₹18.35 trillion in April-September. With this, the government has met half its BE for receipts in H1FY27.
