India's Fiscal Forecast: Tax Surge and Spending Gains for FY26

ICICI Bank's report forecasts an 8.3% rise in India's indirect tax collection for FY26, driven by strong urban GST revenue. Corporate tax is set to grow by 10.4%, reflecting economic improvement. Government spending is anticipated to increase by 7.4%, focusing on infrastructure despite a controlled fiscal deficit.

In a promising economic forecast, a recent ICICI Bank report predicts that India's indirect tax collections will see an 8.3% surge in the financial year 2025-26 (FY26). The growth, attributed to robust government services tax (GST) revenue from urban consumption, surpasses the 7.1% increase recorded in FY25.

The report highlights a boost in corporate tax collections, estimating a 10.4% rise in FY26 compared to a 7.6% increase in FY25, as the economy continues to strengthen. On the expenditure side, the government's spending is projected to grow by 7.4%, up from a 6.1% increase in FY25, indicating plans to support economic growth actively.

Despite a projected 10.1% increase in capital expenditure (capex) for infrastructure development, capex as a percentage of GDP is expected to remain steady at 3.1% for both FY25 and FY26. The fiscal deficit has been revised downwards to 4.8% of GDP, while the current account deficit benefits from resilient services exports and remittances.