Corporate tax collections have outperformed initial projections by growing roughly 22 per cent year-on-year against a 12 per cent target, cushioning revenue losses from fuel duty reductions. Although the deficit touched 42.6 per cent of the full-year target in the first half, September advance tax payments stabilized balances after an August shortfall. Meanwhile, food and fertiliser subsidy payouts fell by 31 per cent, helping offset a 12.7 per cent expansion in year-to-date capital expenditure.
Key points
Strong direct tax collections from corporations are effectively offsetting diminished rev…: Strong direct tax collections from corporations are effectively offsetting diminished revenues caused by cuts to fuel excise duties.
Expenditure reprioritisation remains essential for the government to manage high interest…: Expenditure reprioritisation remains essential for the government to manage high interest burdens alongside a 12.7 per cent rise in capital investments.
Fluctuations in international energy and commodity prices present ongoing risks that coul…: Fluctuations in international energy and commodity prices present ongoing risks that could increase subsidy payouts and disrupt fiscal plans.
Sources checked by our analysis pipeline: 1
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…
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