Here’s why the Centre is hopeful of keeping the FY27 fiscal deficit in check
Marginal slippage seen as crude oil prices surge but buffer from disinvestment, dividends, easing fertiliser prices
- Sep 22, 2026,
- Updated Sep 22, 2026 3:49 PM IST
The Centre is watchful of expenditure as the West Asia war continues fuelling a surge in global crude oil prices. However, official sources indicate that there may not be significant fiscal slippage in FY27. “It is still a fluid situation, and global crude oil prices have risen significantly again. The effort will be to meet the fiscal deficit target while ensuring that expenditure continues in required areas,” said a person familiar with the development.
Part of the Centre’s comfort on the fiscal deficit front comes from the easing of global fertiliser prices that have fallen after a rapid rise in the initial days of the West Asia war. Further alternative supplies have also helped keep prices down.
The Centre had allocated Rs 1.77 lakh crore for the fertiliser subsidy this fiscal, but expectations are that this amount will be overshot and is likely to come up to about Rs 2 lakh crore to Rs 2.1 lakh crore rather than the initial worry of doubling of the subsidy bill.
Meanwhile, robust dividends and receipts from disinvestment in public sector enterprises have also proven to be a robust source of revenue for the Centre in a year of high spending and giveaways on the indirect tax front.
The Centre has already raised close to Rs 73,000 crore from these two heads as against the Rs 80,000 crore target it had set this fiscal from miscellaneous receipts, which is the umbrella term for proceeds from disinvestments, dividends and asset monetisation in PSUs. Expectations are that this will come in at over Rs 1 lakh crore for this fiscal.
For FY27, the Centre had set a target of 4.3% of the fiscal deficit, but a big watch out will be global crude oil prices. If the prices continue to surge, the Centre could potentially consider another round of fuel price hikes at the retail level. However, there is no such discussion as of now.
Global Brent crude oil prices are at close to $102 per barrel on September 22, while the price of the Indian crude oil basket was much higher at $117.36 per barrel on September 21. The average price of the Indian crude oil basket in September has been $114.8 per barrel.
More clarity on expenditure and receipts this fiscal will emerge over the next few weeks as the finance ministry starts the pre-Budget consultations with nodal ministries and departments on their Revised Estimates and Budget Estimates ahead of the Union Budget 2027-28.
ICRA had previously estimated that the fiscal deficit may overshoot the FY27 BE by about Rs 90,000 crore to Rs 1 lakh crore. “This could be comfortably absorbed by expenditure savings, which amounted to Rs 1.6-1.7 lakh crore during FY25-26. This, along with a likely overshooting in small savings collections, would preclude the need to raise additional borrowings in the second half of FY27,” it had said on August 31.
Between April and July 2026, the Centre’s fiscal deficit amounted to 26.8% of the BE to Rs 16.95 lakh crore.
The Centre is watchful of expenditure as the West Asia war continues fuelling a surge in global crude oil prices. However, official sources indicate that there may not be significant fiscal slippage in FY27. “It is still a fluid situation, and global crude oil prices have risen significantly again. The effort will be to meet the fiscal deficit target while ensuring that expenditure continues in required areas,” said a person familiar with the development.
Part of the Centre’s comfort on the fiscal deficit front comes from the easing of global fertiliser prices that have fallen after a rapid rise in the initial days of the West Asia war. Further alternative supplies have also helped keep prices down.
The Centre had allocated Rs 1.77 lakh crore for the fertiliser subsidy this fiscal, but expectations are that this amount will be overshot and is likely to come up to about Rs 2 lakh crore to Rs 2.1 lakh crore rather than the initial worry of doubling of the subsidy bill.
Meanwhile, robust dividends and receipts from disinvestment in public sector enterprises have also proven to be a robust source of revenue for the Centre in a year of high spending and giveaways on the indirect tax front.
The Centre has already raised close to Rs 73,000 crore from these two heads as against the Rs 80,000 crore target it had set this fiscal from miscellaneous receipts, which is the umbrella term for proceeds from disinvestments, dividends and asset monetisation in PSUs. Expectations are that this will come in at over Rs 1 lakh crore for this fiscal.
For FY27, the Centre had set a target of 4.3% of the fiscal deficit, but a big watch out will be global crude oil prices. If the prices continue to surge, the Centre could potentially consider another round of fuel price hikes at the retail level. However, there is no such discussion as of now.
Global Brent crude oil prices are at close to $102 per barrel on September 22, while the price of the Indian crude oil basket was much higher at $117.36 per barrel on September 21. The average price of the Indian crude oil basket in September has been $114.8 per barrel.
More clarity on expenditure and receipts this fiscal will emerge over the next few weeks as the finance ministry starts the pre-Budget consultations with nodal ministries and departments on their Revised Estimates and Budget Estimates ahead of the Union Budget 2027-28.
ICRA had previously estimated that the fiscal deficit may overshoot the FY27 BE by about Rs 90,000 crore to Rs 1 lakh crore. “This could be comfortably absorbed by expenditure savings, which amounted to Rs 1.6-1.7 lakh crore during FY25-26. This, along with a likely overshooting in small savings collections, would preclude the need to raise additional borrowings in the second half of FY27,” it had said on August 31.
Between April and July 2026, the Centre’s fiscal deficit amounted to 26.8% of the BE to Rs 16.95 lakh crore.