Central government’s capex surges 66% in June, subsidy bill also jumps

On the income side, gross tax collections in June were up only 6%, with the excise mop-up down 25% from last year at Rs 21,951 crore, reflecting the duty cuts announced for petrol and diesel in late March. In the first three months of 2026-27, the Centre’s excise duty collections are down 22% at Rs 43,149 crore.

“Weak” growth in Goods and Services Tax collections also weighed on the Centre’s receipts in April, said Aditi Nayar, Chief Economist at rating agency ICRA. “However, customs duty inflows surged by 36%, aided by the duty hikes on gold and silver, elevated global commodity prices, as well as a low base.”

According to Devendra Kumar Pant, Chief Economist at India Ratings & Research, the government’s finances for the first quarter of 2026-27 as a whole suggest the impact of the West Asia war “is not significant”.

“The impact of higher oil prices is not yet fully visible on Union government finances. Had the government not reduced excise duty on petrol and diesel, the tax collections would have been higher,” Pant said.

The Union Budget for 2026-27 estimated Rs 3.89 lakh crore would be collected from excise duty this fiscal. In the first three months of the year, 11% of the target has been collected.

Income tax collections were up 7% in June as well as April-June compared to last year. The corporate tax mop-up was up 17% in June and 20% in the quarter.

On the whole, the Centre’s fiscal deficit – the difference between its income and expenditure that it must bridge by borrowing – was Rs 1.45 lakh crore in June, down 46% from the same month last year. A key reason for the lower fiscal deficit was the government not transferring an extra instalment of tax devolution to states in June.

The Centre’s tax devolution to states is usually transferred in 14 instalments every year. While the additional two instalments have traditionally been transferred towards the end of the fiscal year once the Centre has greater clarity on its finances, the post-pandemic period has seen them being advanced. This has been due to an improvement in the health of its finances.

In June 2025, the Centre transferred Rs 1.63 lakh crore to states as part of their share in the taxes collected. This was double the amount that was transferred in the previous two months. However, in June this year, Rs 87,779 crore was transferred, unchanged from May and June. This helped the Centre’s net tax collections – the gross figure adjusted for refunds and transfer to states – post a 52% growth in June and 18% in April-June. Pant of India Ratings noted that the April-June net tax revenue growth is “much higher” than the budgeted growth of just over 7%.

In terms of the full-year target, the April-June fiscal deficit of Rs 3.08 lakh crore is 18.2% of the Budget estimate of Rs 16.96 lakh crore.

“Depending on how the war pans out and crude oil plays, it does look like that the expenditure on the revenue account could be higher; and in case capex is maintained, there can be pressure on the fiscal deficit ratio,” said Madan Sabnavis, Bank of Baroda’s Chief Economist. “In the stressed case there can be a slippage of 0.3-0.4% of GDP. Higher growth in GDP will provide a statistical cushion, however.”

The Centre is targeting a fiscal deficit of 4.3% of GDP for 2026-27.