India’s Fiscal Gap Reaches 42% of Its Full-Year Target

By the end of September, the Indian government had run a ₹7.14 trillion fiscal deficit, or 42.1% of its full-year target. A year earlier, the gap stood at 36.5% of the target. The latest figures, released Friday by the Controller General of Accounts, show spending outpacing receipts. The government is trying to keep its FY27 deficit within ₹16.96 trillion, or 4.3% of GDP. ^2,3

That ₹7.14 trillion gap reflects ₹25.50 trillion in government spending against ₹18.35 trillion in receipts during April-September. Capital spending, including investment in infrastructure, reached ₹6.55 trillion, or 53.6% of its annual budget. Revenue spending was ₹18.95 trillion. Receipts included ₹12.76 trillion in net tax revenue and ₹4.81 trillion in non-tax revenue. The government’s accounts are not final, and the timing of payments and collections can shift the figures. ^2,3

The ₹12.76 trillion in net tax revenue highlights the challenge ahead. ICRA says gross tax revenue grew just 6.1% in the first half, held back by lower fuel taxes and slow personal income tax growth. Chief economist Aditi Nayar says the government would need gross tax growth of roughly 28% to 38% in the second half to meet its annual goal. Meanwhile, revenue spending grew 10%, faster than the 3.6% rise in revenue receipts. High global energy prices could also add pressure through fuel and fertiliser subsidies. ^1,4

Those second-half demands come as capital spending growth has slowed sharply: ICRA says it fell to 2.8% in the second quarter, from 23.7% in the first. The government must balance keeping investment on track with controlling other spending and bringing in enough revenue. ICRA estimates a possible ₹1.3 trillion to ₹1.4 trillion shortfall against the deficit target, though savings or higher small-savings inflows could help make up the gap. The next test is whether the Centre can meet its remaining FY27 targets by March. ^1,2