India’s fiscal deficit reached 42.1 per cent of the annual target by October 30. Goldman Sachs said, "We continue to expect the central government to stick to the 4.3% of GDP fiscal deficit target." Strong corporate tax collections helped the government manage spending pressures despite higher costs and lower fuel duties.

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India is likely to meet its fiscal deficit target of 4.3 per cent of GDP in FY27 despite higher spending pressures, with stronger corporate tax collections helping offset weaker revenue from fuel duties, according to a Goldman Sachs Research report cited by ANI.

The investment bank expects the Centre to stay within its fiscal deficit target largely by reprioritising expenditure, even as rising interest payments, capital spending and potential subsidy requirements put pressure on government finances.

"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," Goldman Sachs said.

The report estimated that the fiscal deficit during April-September reached 42.6 per cent of the full-year budgeted amount, a faster pace than in recent years, although below pre-pandemic levels.

Official data released by the Controller General of Accounts on October 30, however, placed the April-September deficit at Rs 7.14 lakh crore, or 42.1 per cent of the annual Budget Estimate of Rs 16.96 lakh crore.

Corporate tax collections provide support

Goldman Sachs highlighted an improvement in September, when the government's fiscal position was broadly balanced, compared with a deficit of Rs 2.6 lakh crore in August.

Higher direct tax collections, particularly advance corporate tax payments, helped offset increased interest payments and capital expenditure during the month.

Direct tax receipts rose 13 per cent year-on-year in September, supported by a 27 per cent increase in corporate tax collections. Personal income tax receipts, however, declined 8 per cent.

For the financial year so far, corporate tax collections grew about 22 per cent, against the Budget's projected growth of 12 per cent. Income tax receipts increased around 9 per cent, below the budgeted growth estimate of 18 per cent.

According to Goldman Sachs, stronger corporate tax receipts have helped cushion the decline in excise revenue following reductions in petrol and diesel duties.

The Centre has also revised fuel export duties, removing the Rs 2.5 per litre levy on petrol while raising the duty on diesel to Rs 11.5 per litre from Rs 8.5 and on aviation turbine fuel to Rs 11 from Rs 10.5, according to a Finance Ministry notification.

Higher spending remains a risk

Capital expenditure 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 reduced spending on roads and highways.

For April-September, capital expenditure growth stood at 12.7 per cent, Goldman Sachs said.

Overall government expenditure increased 12 per cent year-on-year in September, while subsidy spending declined 31 per cent on lower food and fertiliser outlays.

Goldman Sachs cautioned that elevated global commodity prices could increase the government's fertiliser subsidy burden and potentially require additional fuel excise duty relief.

Such pressures, the report said, remain risks to the Centre's ability to meet its fiscal deficit target through spending adjustment