The Centre is likely to meet its fiscal deficit target of 4.3 per cent of GDP for FY27 despite recording 42.6 per cent of its full-year budgeted deficit in the first six months, with stronger corporate tax collections providing a cushion against revenue pressures, Goldman Sachs Research said in a report.The investment firm expects the government to manage its finances through expenditure reprioritisation, even as higher interest payments and capital spending weigh on the fiscal position. However, a sustained rise in global commodity prices could complicate the exercise by pushing up fertiliser subsidies and prompting further fuel excise duty relief.“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, as quoted by ANI.The Centre’s fiscal deficit between April and September stood at 3.9 per cent of GDP, or 42.6 per cent of the full-year budget estimate. While the pace was higher than in recent years, it remained below pre-pandemic levels, Goldman Sachs noted.A significant improvement was visible in September, when the government’s fiscal position was balanced, compared with a deficit of Rs 2.6 lakh crore in August. Stronger direct tax collections, particularly from corporates, helped offset higher interest payments and capital expenditure.Direct tax receipts rose 13 per cent year-on-year in September, supported by a 27 per cent jump in corporate tax collections. Income tax receipts, however, contracted 8 per cent during the month.The trend has been more pronounced in corporate tax collections during the financial year so far. These have grown around 22 per cent year-on-year, significantly above the 12 per cent growth estimated in the Budget. Income tax collections, meanwhile, increased around 9 per cent, falling short of the budgeted growth projection of 18 per cent.The stronger corporate tax performance has helped compensate for the revenue impact of lower excise collections following reductions in petrol and diesel duties.On the expenditure side, capital spending increased 17 per cent month-on-month on a seasonally adjusted basis in September, although it remained 3 per cent below the year-ago level, largely due to lower allocations towards roads and highways. For the April-September period, capital expenditure growth stood at 12.7 per cent.Overall government expenditure rose 12 per cent year-on-year in September, while subsidy spending declined 31 per cent, reflecting lower outgo on food and fertilisers.Goldman Sachs flagged energy prices as a potential source of pressure on government finances. A prolonged increase in global commodity prices could raise the fertiliser subsidy burden and increase the possibility of additional fuel tax relief, making expenditure management more challenging.The Centre’s ability to contain spending pressures while sustaining tax revenue growth will therefore remain crucial to meeting its FY27 fiscal deficit target.
