Experts feel that fiscal deficit likely to overshoot the budget estimates lower that earlier projection.
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VELANKANNI RAJ B
Subsidy on food, fertilizer and fuel surged over 47 per cent in first two months (April-May) period of FY27, data from Controller General of Accounts (CGA) showed on Tuesday. With de-growth in total receipts, Centre’s fiscal deficit, the gap between expenditure and income, surged 9.6 per cent.
Fiscal deficit was ₹1.62 lakh crore in value terms at the end of May, CGA data showed. At the end of May 2025, the Centre’s fiscal deficit had reduced to 0.8 per cent of the BE of 2025-26 or ₹13,163 crore. The Centre has set a fiscal deficit target of 4.3 per cent of the GDP or ₹16.96 lakh crore in the current fiscal.
Budget allocation
Data also revealed 18 per cent of budget allocation on account of key subsidy has been spent in two months with urea subsidy alone exhausted nearly 1/4th of the 12 months fund. Still, experts feel that fiscal deficit likely to overshoot the budget estimates lower that earlier projection.
As per the CGA data, net tax receipts stood at ₹3.48 lakh crore, while non-tax receipts were ₹3.51 lakh crore. The total expenditure of the Central government stood at ₹8.81 lakh crore at the end of May, including capital expenditure of ₹2.51 lakh crore.
Basic developments
According to DK Srivastava, Chief Policy Advisor, EY India, CGA data for April and May reflect three basic developments: first, the effect of the ongoing West Asian crisis, second, the sustained impact of the major GST reforms undertaken in September 2025 and third, substantive transfer of dividends from the RBI to the GoI. As far as GoI’s gross tax revenues (GTR) are concerned, the revenue performance of direct and indirect taxes indicate directionally opposite trends.
In the case of direct taxes, there has been a growth of 10.5 per cent during April-May period of FY27 over the corresponding period of FY26 in which the major contribution came from the corporate income tax. On the other hand, indirect taxes showed a contraction of (-)7.5 per cent. GST revenues contracted by (-)12.2 per cent during these two months. “While growth in GoI’s GTR was 1.8 per cent, its net tax revenues contracted because a higher growth of 7.4 per cent was provided in assignment to states during the first two months of 2026-27,” Srivastava said.
ICRA Chief Economist Aditi Nayar said looking ahead, the sharp dip in global energy prices following the cooling of tensions in West Asia has improved the outlook for the GoI’s fiscal position in FY2027. “ICRA now expects only a marginal overshooting in the GoI’s fiscal deficit vis-à-vis the target of 4.3 per cent of GDP for FY27, as against the previous estimate of a 40 bps slippage, which assumed an average crude oil price of $95/barrel for the fiscal,” she said.
Published on June 30, 2026
