Despite tax short-fall, Govt on track to meet fiscal deficit and CAPEX targets: PwC India

The government is on track to meet the fiscal deficit and capital expenditure (CAPEX) targets for the current financial year, supported by strong non-tax revenue inflows and front-loaded spending across key sectors, according to Ranen Banerjee, Partner and Economic Advisory Leader at PwC India.

In an exclusive conversation with ANI, Banerjee said the Centre's fiscal position remains comfortable even as nominal GDP growth may come in slightly lower than earlier estimated.

Banerjee said that the fiscal deficit target of 4.4 per cent of GDP for FY26 is well within reach.



"Given the trends till October, nominal GDP may be a couple of percentage points lower. But the government has access to significant non-tax revenues through dividends, which have been much higher this year. So achieving the fiscal deficit target should not be a challenge," he said.

He added that the government has a consistent record of fiscal over-achievement.

"Even if the denominator is impacted due to lower nominal GDP, our estimates show that the government can comfortably meet the 4.4 per cent target. Optically, the deficit could even come in at 4.3 per cent, given the strong revenue performance."

On capital expenditure, Banerjee said the government has already executed a large part of its planned spending, reducing the risk of any major deviation from the Budget estimate.

"CAPEX this year has been quite front-loaded. We don't see any challenge in achieving the allocated expenditure. Even if there is a shortfall, it will be limited to just a couple of percentage points," he said.

Higher public investment continues to be directed towards defence, railways, and roads, and Banerjee noted that this spending is firmly on track. He also dismissed the likelihood of expenditure overshooting the Budget.

"Overshooting is unlikely because higher utilisation would require new projects to be launched quickly. Some CAPEX is also transferred to states, and while allocations are there, it is unlikely that additional new projects will absorb significantly higher amounts this year. So the final number should be very close to the Budget estimate."

However, he pointed out that private capital expenditure continues to lag, even as the government fills the investment gap through public spending. Banerjee said private CAPEX depends on companies' confidence in sustained demand.

"There is still uncertainty on the demand front because of global headwinds, export challenges and mixed domestic signals. Firms want to see whether the demand boost is sustainable," he told ANI.

The GST rate reclassification in October has lifted expectations of stronger consumption.

"The value of sales has gone up after the GST cut, although GST collections were slightly lower. If consumption picks up further and capacity utilisation rises to 90-95 per cent, private players will be motivated to invest in expanding capacity," he said.

Banerjee said the November GST data, expected in December, will give a clearer picture of consumption behaviour during the festive period.

"October showed higher sales values, but festivals did not coincide with last year, so comparisons are difficult. November data will tell us whether the expected consumption and compliance boost is materialising," he added.

According to Banerjee, the trend in consumption over the next quarter will be crucial in determining when private investment starts gathering pace.