India’s central government fiscal deficit reached 42.1 percent of budget estimates in the first half of the current financial year, up from 36.5 percent a year earlier. The figure remains below the 50 percent halfway mark, but the second half faces higher revenue and spending run rates.
Revenue and disinvestment
Dividends and profits received reached 3.4 trillion rupees in the first half, or 87.4 percent of budget estimates, and made up 18.6 percent of total receipts. Disinvestment proceeds reached 62,159 crore rupees, or 77.7 percent of the 80,000 crore rupee target.
The bulk of those proceeds came from a 6.5 percent stake sale in Life Insurance Corporation of India, which raised 31,515 crore rupees. Combined stake sales in Coal India and NHPC brought in 9,900 crore rupees.
Tax shortfall and spending pressures
Tax collections reached 46 percent of budget estimates, growing 6.1 percent year on year. Excise duty collections fell 22.3 percent, while income tax grew 6.7 percent.
Capital expenditure reached 53.6 percent of budget estimates, with growth of 12.7 percent. Meeting the budget targets would require gross tax collections to grow 12.3 percent in the second half, and capital spending to rise 16.2 percent.
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Icra’s slippage estimate
Aditi Nayar, chief economist at Icra, said global energy prices remaining at elevated levels could lead to an overshoot on fertiliser and fuel subsidies, along with a shortfall on the receipts side. Icra expects a modest fiscal slippage of 1.3 to 1.4 trillion rupees relative to the FY27 target of 16.96 trillion rupees, or 4.3 percent of GDP.
The Indian government has missed its budget capital expenditure targets by 1.3 to 5.3 percent in each of the last four years, according to the analysis. In the last two years, 60 to 68 percent of the budgeted fiscal deficit showed up in the second half.
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Source: Icra
