Govt to achieve 4.3 pc fiscal deficit target for FY27 despite projected dip in GST receipts: S&P

SP Global Ratings on Monday said it is confident that the Indian government will achieve its 4.3 per cent fiscal deficit target for FY27 despite a projected dip in goods and services tax GST receipts following the rate streamlining in September 2025.

S&P Global Ratings on Monday said it is confident that the Indian government will achieve its 4.3 per cent fiscal deficit target for FY27 despite a projected dip in goods and services tax (GST) receipts following the rate streamlining in September 2025. The Union Budget signals a firm commitment to fiscal discipline, strengthening a trajectory of steady consolidation that aligns with global expectation, the global rating agency said. By maintaining a clear roadmap toward narrowing the fiscal deficit targeting 4.4 per cent of GDP for FY26 and 4.3 per cent for FY27, the central government is signaling a balance between growth and responsible spending. ''We believe India (BBB/Stable/A-2) will hit its fiscal 2027 deficit target despite the government budgeting for lower Goods and Services Tax (GST) receipts, following the streamlining of GST rates in September 2025. There is upside to GST revenues coming from stronger consumption and higher collection efficiency, in our view,'' S&P said. In addition, support for meeting the deficit target will stem from continued large dividends from the central bank and potential capital underspending, it added. The global rating agency anticipates that consumer spending and public investments will maintain India's real GDP growth at 6.7 per cent in FY27 and 7 per cent in FY28. ''These growth rates continue to place India above sovereign peers at similar income levels and should continue to support fiscal revenue increase,'' it said. According to the rating agency, the lowered GST rates will support middle-class consumption and complement income tax cuts. These changes are likely to make consumption a greater driver of growth compared with investment, both in this fiscal year and the next. To counter high US tariffs impacting exports, India's FY27 Budget focuses on investment-led growth, increasing total capital outlay to 5.6 per cent of GDP from 5.1 per cent. The strategy includes a shift to targeting a 49-51 per cent central government debt-to-GDP ratio by FY31, with a focus on manufacturing, infrastructure, and potential, trade deals with the US to boost labour-intensive sectors. ''If India can secure a trade agreement with the US, it should reduce uncertainty and enhance confidence, which would boost labour-intensive sectors,'' it said.

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