New Delhi: India is likely to achieve its ambitious fiscal deficit target of 4.3% of GDP for the financial year 2026-27, according to a recent report by Goldman Sachs Research.
This projection comes even as the deficit reached 42.6% of the full-year estimate in the first half of the current fiscal, highlighting the government’s strategic financial management.
The report suggests that robust corporate tax collections are playing a crucial role in offsetting revenue shortfalls. Despite rising interest payments on government borrowings and increased capital spending on infrastructure projects like roads and railways, the Centre is expected to meet its goal by carefully re-prioritizing expenditures.
Goldman Sachs noted that while the fiscal deficit for April-September stood at 3.9% of GDP, the government’s financial position saw an improvement in September. This was largely due to a significant 13% year-on-year growth in direct tax collections, fueled by a 27% surge in corporate tax receipts. This strong performance by corporate taxes, which grew 22% year-on-year against a budgeted 12%, is cushioning the impact of reduced excise duties on petrol and diesel, aimed at providing relief to consumers.
However, the report also flags potential risks. Elevated global commodity prices could lead to increased fertilizer subsidies for farmers and further fuel excise duty relief, potentially complicating efforts to maintain the deficit target. The government’s ability to balance these pressures while continuing its infrastructure push will be key.