Now Reading: Fiscal outlook faces geopolitical, revenue risks: CGA data
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Fiscal outlook faces geopolitical, revenue risks: CGA data
The Centre's fiscal outlook for 2026-27 is under pressure from geopolitical headwinds and recent tax changes, though strong non-tax receipts and policy interventions may keep outcomes broadly on track, according to Controller General of Accounts (CGA) data. Gross tax revenues grew only 3.7% in the first quarter of 2026-27, driven by subdued personal income tax (PIT) and GST collections.
PIT revenue growth was just 0.037% in 2025-26, implying zero buoyancy, and has picked up only to 6.8% in the first quarter of 2026-27. GST revenues, after growing 4.67% in the second half of 2025-26, contracted by 11% in the first quarter of 2026-27. Both taxes underwent substantial rate rationalisation in 2025-26, with the government expecting base expansion to eventually offset initial revenue losses.
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The government's fiscal consolidation path relied on a projected nominal GDP growth of over 11% for 2026-27. With tax buoyancy near zero, any shortfall in revenue will have to be compensated by higher non-tax receipts such as RBI dividends or disinvestment proceeds. The 11% GST contraction in Q1 is especially sharp because it follows rate cuts on essential items and a broader rationalisation. If this trend persists, the fiscal deficit target of 4.5% of GDP could be at risk, forcing either spending cuts or higher market borrowings. The next key signal will be the second quarter tax collection data due in November.
Source: thehindu.com
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