The Government of India's (GoI's) fiscal deficit eased marginally to Rs. 4.6 trillion in 4M FY2027 (26.8% of FY2027 Budget Estimate; BE) from Rs. 4.7 trillion in 4M FY2026 (30.8% of FY2026 Provisional Actuals; PA). While revenue deficit was compressed to just Rs. 0.4 trillion in 4M FY2027 from Rs. 1.5 trillion a year-ago, this was largely offset by the strong ~30% expansion in capital expenditure, limiting the favourable impact on the fiscal deficit. Interestingly, while gross tax revenues (GTR) rose by a healthy ~11% YoY in 4M FY2027, central tax devolution (CTD) to states declined by ~13%, boosting the growth in net tax revenues (NTR; +27.6%) and moderating the size of the revenue deficit.

• Direct taxes and customs duty boosted 11% growth in GTR in 4M FY2027: The GoI’s GTR rose by 11% YoY in 4M FY2027, led by a 20%-plus growth in direct taxes, amid a low base, and a 38% growth in customs duty collections.
  
• FY2027 target for PIT, excise duty to be missed: To meet the FY2027 BE, the GoI’s GTR needs to expand by 8.7% YoY in the remaining 8 months of FY2027.