India's fiscal deficit rises to Rs 7.14 lakh crore in H1 FY27

India’s fiscal deficit widened by around 25% year-on-year to Rs 7.14 lakh crore during the April-September period of 2026-27, driven by higher food and fertiliser subsidies and subdued tax collections, according to official data released on Friday.
The fiscal deficit, which is the gap between the government's expenditure and revenue, stood at 42.1% of the full-year Budget estimate of Rs 16.96 lakh crore during the first half of the current financial year. In the corresponding period of 2025-26, it was Rs 5.7 lakh crore, or 36.5% of the annual target.The government's revenue expenditure rose 10% year-on-year during the April-September period, while revenue receipts increased by a modest 3.6%, reflecting pressure on both the expenditure and revenue fronts.
According to data released by the Controller General of Accounts (CGA), the Centre's net tax revenue stood at Rs 12.76 lakh crore during the first six months, accounting for 44.5% of the full-year target.Meanwhile, total government expenditure increased to Rs 25.5 lakh crore, or 47.7% of the 2026-27 Budget Estimates, compared with around Rs 23 lakh crore in the corresponding period of the previous financial year.
Gross tax revenues grew by a subdued 6.1% year-on-year in the first half of FY27. Lower excise duty collections, partly reflecting cuts in duties on petrol and diesel, along with slower growth in personal income tax collections, weighed on overall tax revenue.Aditi Nayar, Chief Economist at ICRA, said the government would need to contain its revenue deficit during the second half of FY27 to meet its full-year fiscal target, which could prove challenging.
She noted that the government faces steep growth requirements of 28-38% in the second half of the financial year to meet its targets. A shortfall in tax collections could be partly offset by stronger customs duty receipts, which grew 16.5% in the first half.With global energy prices remaining elevated, ICRA expects higher-than-budgeted expenditure on fertiliser and fuel subsidies, along with a possible shortfall in revenue collections. This could result in a modest fiscal slippage of Rs 1.3-1.4 lakh crore against the FY27 target, Nayar said.
However, the impact could be partly absorbed through expenditure savings, which had reached Rs 16-17 lakh crore during FY26.Nayar also said a higher fiscal deficit would not necessarily translate into increased government borrowings, as small savings inflows rose 54% year-on-year in the first half of FY27 and are expected to exceed the budgeted levels for the full financial year.India's fiscal deficit stood at Rs 15.19 lakh crore, or 4.4% of GDP, in FY26. For FY27, the Narendra Modi government has set a target of reducing the fiscal deficit to 4.3% of GDP, although the deficit in absolute terms is projected to rise to Rs 16.96 lakh crore, stated report.

(Business Correspondent)