Domestic economy remains strong, food, fuel exert pressure 

The Centre remains fairly confident of domestic growth prospects this fiscal inspite of the continuing West Asia crisis, but fuel and fertiliser bills are exerting considerable pressure on the Exchequer.

"As of now, the economy remains on track, and there are no signs of stress that we are worried about," said a top government source. While the Indian economy grew by 7.7% in FY26, growth is seen to slow down to 6.6% this fiscal, as per the latest estimate by the Reserve Bank of India.

The West Asia crisis has, however, impacted the Centre's spends on fuel and fertiliser, with about Rs 3 lakh crore additional expenditure foreseen.

According to sources, with prices and supplies of fertiliser impacted, the fertiliser ministry has indicated that it would require an additional 100% of the Budget estimate of Rs 1.71 lakh crore for the fertiliser subsidy this year. The Centre is looking to ramp up domestic production to offset some of this.

Meanwhile, to ensure that fuel marketing companies do not hike prices of diesel and petrol at the pump, they faced under-recoveries of Rs 1.23 lakh crore. "After 78 days of this, the realisation was that this can no longer be supported, and companies were told to increase retail prices," said the source.

The government, however, remains hopeful of steady revenue from disinvestment proceeds that have been budgeted at Rs 80000 crore this fiscal.

For now, the finance ministry is unlikely to table a supplementary demand for grants in the Monsoon session of Parliament.

It is likely to take a call on the fiscal numbers later in the year and will then undertake approvals for additional spending, sources said. For FY27, the Budget has targeted a fiscal deficit of 4.3% of the GDP.