How the government finance math looks more challenging in H2 FY27
Mint - Economy · Published 11 November 2026 · Last updated
India's fiscal deficit reached 42.1% of Budget estimates in H1 FY27, raising challenges for the second half as dividend cushions fade and tax collections lag.
Key points
- India's fiscal deficit reached 42.1% of the FY27 Budget estimates in the first half (H1 FY27), compared with 36.5% in the same period of the previous year, remaining below the halfway mark of 50%.
- Capital expenditure commitments stood resilient at 53.6% of the budget estimates during H1 FY27, according to official data.
- Non-tax revenues were heavily supported by dividends and profits amounting to ₹3.4 trillion, which accounted for 18.6% of total receipts and covered over 50% of capital expenditure.
- Disinvestment proceeds achieved an impressive strike rate of 77.7% of budget estimates or ₹62,159 crore in H1 FY27, largely driven by a 6.5% stake sale in Life Insurance of India (LIC) fetching ₹31,515 crore.
- Stake sales in Coal India and NHPC contributed an additional ₹9,900 crore to government receipts during the first half of the financial year.
- The proposed strategic sale of a 60.7% stake in IDBI Bank is expected to be finalized within FY27, potentially adding ₹52,878 crore to disinvestment proceeds.
- Gross tax collections lagged behind expectations, reaching only 46% of budget estimates with a year-on-year growth of 6.1% in the first half.
- Personal income tax growth remained subdued at 6.7%, while excise duty collections registered a steep decline of 22.3% following fuel tax cuts.
- Economists at Icra project a modest fiscal slippage of ₹1.3-1.4 trillion relative to the FY27 target, potentially pushing the fiscal deficit to 46-47% of GDP.
Background
- In previous years, the central government successfully contained its fiscal deficit primarily through massive dividends and profits distributed by the Reserve Bank of India (RBI) and other public-sector companies.
- Historical data from FY23 to FY26 indicates that dividend receipts averaged 14% of total receipts in the first half of the financial year compared with just 3.6% in the second half.
- Over the last two fiscal years, between 60% and 68% of the budgeted fiscal deficit materialized during the second half of the year.
- In preceding years, the government consistently missed its budget capital expenditure targets by 1.3% to 5.3% despite maintaining strong first-half execution trends in three out of four years.
- The government established a fiscal deficit target of ₹16.96 trillion, equivalent to 4.3% of GDP, for FY27 during the Union Budget.
Prelims facts and Mains angle for this issue are in the full SWAदेSH note.
Original report: Mint - Economy