The Government of India’s (GoI) fiscal deficit inched up to Rs. 3.1 trillion in Q1 FY2027 (18.2% of FY2027 Budget Estimate; BE) from Rs. 2.8 trillion in Q1 FY2026 (18.5% of FY2026 Provisional Actuals; PA), owing to the sharp 23.7% expansion in capex, even as the revenue deficit narrowed between these quarters. While the gross tax revenues (GTR) grew by a sluggish 3.7% in Q1 FY2027, led by the duty cut-led contraction in excise duty collections and Integrated-GST (IGST) outflows, net tax revenues expanded by a robust 17.8% as the GoI did not share an additional tranche of tax devolution with the states in June 2026 (unlike June 2025). Assuming an average crude oil price of $80-85/barrel in FY2027, ICRA estimates the net impact of the West Asia conflict (so far) on the GoI’s fisc at ~Rs. 1.0 trillion or 0.2% of GDP.

• Revenue receipts expanded by 11% in Q1 FY2027, amid jump in net tax revenues: The GoI’s revenue receipts rose by 11.0% YoY to Rs. 10.1 trillion in Q1 FY2027, amid a sharp 17.8% expansion in net tax revenues, while non-tax collections saw a marginal 1.2% growth.
• Total spending increased by ~11% YoY in Q1 FY2027: Revenue expenditure rose by 7.4% in Q1 FY2027, amid a decline in interest payments (-10.3%), even as subsidies expanded by a sharp 37%. Excluding these, revex rose by a strong 16.4% in Q1. Capex surged by a robust ~24% in Q1 FY2027 (+66% in June 2026), which is likely to augur well for GDP growth.