Monday 02 / November / 2026
New Delhi: The Centre is likely to meet its fiscal deficit target of 4.3 per cent of GDP for FY27 despite the deficit reaching 42.6 per cent of the full-year estimate in the first six months, as stronger corporate tax collections are helping offset revenue pressures, according to a report by Goldman Sachs Research.
The firm said the government would most likely achieve the target by reprioritising expenditure, even as higher interest payments and capital spending put pressure on its finances.
It also flagged risks from a possible rise in fertiliser subsidies and additional fuel excise duty relief if global commodity prices remain elevated.
"We continue to expect the central government to stick to the 4.3% of GDP fiscal deficit target, most likely through re-prioritisation of spending," the report said.
Goldman Sachs estimated that the fiscal deficit during April-September stood at 3.9 per cent of GDP and 42.6 per cent of the full-year budgeted amount, a higher pace than in recent years, although below the level seen before the pandemic.
The report highlighted the improvement in September, when the government's fiscal position was balanced, compared with a deficit of Rs 2.6 lakh crore in August. Higher direct tax collections, largely driven by advance tax payments, offset increased interest payments and capital expenditure during the month.
Direct tax collections grew 13 per cent year-on-year in September, driven by a 27 per cent rise in corporate tax receipts, while income tax collections contracted 8 per cent during the month.
Corporate tax receipts have been particularly strong during the financial year so far, rising around 22 per cent year-on-year, against the Budget's estimated growth of 12 per cent. Income tax receipts grew around 9 per cent, below the budgeted growth estimate of 18 per cent.
The report said strong corporate tax collections were helping cushion the revenue impact of lower excise receipts following reductions in petrol and diesel duties.
In the latest revision, the Centre has scrapped the Rs 2.5 per litre export duty on petrol, while increasing the levy on diesel to Rs 11.5 per litre from Rs 8.5 and on aviation turbine fuel (ATF) to Rs 11 per litre from Rs 10.5, according to a Ministry of Finance notification.
Capital expenditure rose 17 per cent month-on-month on a seasonally adjusted basis in September, but remained 3 per cent lower than a year earlier, mainly due to lower spending on roads and highways. On a financial year-to-date basis, capital expenditure growth remained strong at 12.7 per cent.
Overall government spending increased 12 per cent year-on-year in September, while subsidy expenditure fell 31 per cent, reflecting lower food and fertiliser subsidies.
The report cautioned that higher energy prices could put pressure on the fiscal outlook through increased fertiliser support and further fuel tax relief, which could complicate efforts to meet the annual deficit target.
