Walking the fiscal tightrope won’t be easy

The fiscal arithmetic raises the possibility of expenditure rationalisation in the coming months

On spending, capital expenditure, which had grown at a staggering 23.7 per cent in the first quarter, slowed down to just 2.8 per cent in the second quarter.

3 min readNov 10, 2026 06:10 AM IST First published on: Nov 10, 2026 at 06:10 AM IST

Half way through the financial year, the Union government’s fiscal position presents a mixed picture. On the revenue side, recent data from the Controller General of Accounts shows that gross tax collections have grown at a subdued 6.1 per cent during April-September this year, marginally slower than the full year growth factored in the budget estimates. Disinvestment proceeds, though, are expected to exceed expectations, driven by the IDBI stake sale. On the expenditure side, capital spending by the Centre is showing signs of slowing down, while there is the growing likelihood of the subsidy bill exceeding initial estimates. Together, these trends raise the risk of a fiscal slippage this year.

Direct taxes have grown at a fairly healthy pace, corporate taxes more than personal income taxes. But the bigger drag has been due to excise revenue. Collections have fallen sharply due to the excise duty cuts on petrol and diesel — revenue has been just Rs 1.07 lakh crore so far this year, as compared to Rs 1.38 lakh crore over the same period last year. But, according to ICRA, this could be “partly offset by excess collections on the customs duty front, which has expanded by a strong 16.5 per cent in H1 (first half) FY2027”. On disinvestment, so far the government has mopped up Rs 55,757 crore and another Rs 6,366 crore in asset monetisation. Add to this the government’s share in the IDBI stake sale — Fairfax Financial Holdings has been selected as the buyer for a 60.72 per cent stake in the bank for Rs 52,878 crore — and the target of Rs 80,000 crore this year is likely to be surpassed.

On spending, capital expenditure, which had grown at a staggering 23.7 per cent in the first quarter, slowed down to just 2.8 per cent in the second quarter. But, the subsidy bill is likely to overshoot its budgeted amount. According to CareEdge Ratings the “fertiliser subsidy bill to exceed budget estimates, rising to Rs 2.5-2.7 trillion as against the budgeted Rs 1.7 trillion”. This will add to pressures on the fiscal deficit. The Union budget had pegged the fiscal deficit at 4.3 per cent of GDP. But, CareEdge ratings expects it to be in the range of 4.3-4.5 per cent. Economists at SBI also expect the deficit to be higher by Rs 1.2 lakh crore due to revenue loss on account of excise cuts, and increase in the fertiliser and petroleum/LPG subsidy. This fiscal arithmetic raises the possibility of expenditure rationalisation in coming months.