Govt meets 37% of FY27 capex target as April-July spending jumps 30% | Economy & Policy News

The Centre has spent 37 per cent of its capital expenditure target in the first four months of the current financial year, data released by the Controller General of Accounts (CGA) on Monday showed. The government has set a capital expenditure target of ₹12.22 trillion in the Budget for 2026-27 (FY27).

 

The government’s capital spending jumped 30 per cent year-on-year (Y-o-Y) to ₹4.51 trillion in April-July. In the corresponding period of the last financial year, the government had met 31 per cent of the capital expenditure target.

 

Despite the sharp rise in capital spending, the government maintained a firm grip on its finances, with the fiscal deficit at ₹4.55 trillion in April-July, down nearly 3 per cent Y-o-Y.

  

At ₹4.55 trillion, the deficit accounted for 27 per cent of the Budget Estimate (BE) of ₹16.96 trillion for FY27. The government’s fiscal deficit was 30 per cent of the target in April-July last year.

 

The government’s total expenditure rose nearly 13 per cent to ₹17.62 trillion, which included ₹13.11 trillion in revenue expenditure, up nearly 8 per cent Y-o-Y.

 

Spending on major subsidies shot up 35 per cent to ₹1.54 trillion in April-July, driven by a sharp surge of 46 per cent in fertiliser subsidies. With this, the Centre has met 37 per cent of its expenditure target for major subsidies. This is up from 30 per cent in the same period a year earlier.

 

In April-July, the government’s total receipts grew a little over 19 per cent Y-o-Y to ₹13.07 trillion, which included ₹12.68 trillion in revenue receipts, also up 19 per cent Y-o-Y.

 

After remaining sluggish in the first three months of the year, gross tax collections showed a robust recovery in April-July, with growth of a little over 11 per cent Y-o-Y to ₹12.18 trillion. The Centre’s net tax collections were ₹8.45 trillion, up nearly 28 per cent Y-o-Y.

 

Net tax collections rose at a much healthier pace amid a contraction in tax devolution to the states, as four tranches of devolution have been shared with the states in April-July FY27 versus five in April-July FY26, ICRA Chief Economist Aditi Nayar said. “With two tranches being shared in August versus one in August 2025, the pace of growth will normalise and come closer to that of gross tax revenues,” she added.

 

Meanwhile, even as excise duty collections declined 23 per cent Y-o-Y in April-July following a cut in special additional excise duty on petrol and diesel in late March, tax collections remained strong due to a nearly 21 per cent rise in corporate tax collections and a 38 per cent jump in customs duty collections after the government raised import duty on gold and silver earlier this year.

 

“While ICRA estimates the fiscal deficit to overshoot the BE by ₹INR 0.9-1.0 trillion, this could be comfortably absorbed by expenditure savings, which amounted to INR 1.6-1.7 trillion during FY26,” Nayar said.