The Centre’s fiscal deficit for the first half (April-September) of the financial year 2026-27 (FY27) widened to 42 per cent of the Budget Estimate (BE), against nearly 37 per cent of the BE in the corresponding period last year, as tax collections slowed while the pace of expenditure remained robust, data released by the Controller General of Accounts (CGA) showed on Friday.
In the first half of 2026-27 (H1FY27), the Centre’s fiscal deficit grew nearly 25 per cent year-on-year (YoY) to ₹7.14 trillion.
The government’s total expenditure increased nearly 11 per cent YoY to ₹25.50 trillion in April-September, as revenue expenditure — led by subsidy spending — rose 10 per cent YoY to ₹18.95 trillion.
The government exhausted 54 per cent of its BE for major subsidies during H1FY27, including 73 per cent of the urea subsidy target and 62 per cent of the nutrient-based fertiliser subsidy target.
Economists believe 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 in the revenue deficit was driven by the 10 per cent growth in revenue expenditure, which considerably outpaced the muted 3.6 per cent rise in revenue receipts in the first half of the fiscal. With the upsurge in H1FY27, the GoI will need to curtail its revenue deficit in H2FY27 relative to the levels seen in the year-ago period, in order to meet its target for the fiscal, which may prove challenging,” Icra chief economist Aditi Nayar said.
Capital expenditure (capex) also jumped 13 per cent YoY to ₹6.55 trillion in the first six months of the year. However, in September, public capex was down 3 per cent YoY. This was the second consecutive month of decline in capex after a sharp contraction of 30 per cent in August.
The fall in capital spending recorded in the last two months may weigh on India’s economic growth, Nayar pointed out.
With a capex increase of nearly 13 per cent YoY in H1FY27, the government has met nearly 54 per cent of its BE for the current year. “The asking rate for H2 stands at a considerable 16.2 per cent,” Nayar said.
The government’s revenue receipts, including both tax and non-tax revenue, inched up nearly 4 per cent to ₹17.57 trillion due to a slowdown in tax collections. Net tax collections increased nearly 4 per cent YoY to ₹12.76 trillion in H1. The government has met nearly 45 per cent of the BE for net tax collections in H1FY27. Gross tax collections rose 6 per cent YoY to ₹19.80 trillion in H1.
The slowdown in tax mop-up in the first six months was led by a 22 per cent YoY contraction in Union excise duty collections 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 crude oil prices after the onset of the West Asia war.
Income tax collection growth was also in single digits, up nearly 7 per cent YoY to ₹6.31 trillion in April-September.
Economists caution that the fall in excise duty collections and subdued increase in income tax mop-up may lead to the government missing the BE for both. However, the shortfall can be offset by strong customs duty mop-up, which was up nearly 17 per cent YoY 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 collections on the customs duty front,” Nayar said.
Total receipts rose 6 per cent YoY to ₹18.35 trillion in April-September. With this, the government has met half of its BE for total receipts in H1FY27.
