Capex cuts to offset tax shortfalls, Govt on track for fiscal targets of FY26

The Central government is expected to meet its fiscal deficit target for FY26 by cutting back on capital expenditure to offset potential shortfalls in income tax and GST collections, according to a report by Goldman Sachs.

- TBG NETWORK

The report highlighted that central government capex contracted sharply in October, declining by around 28 per cent year-on-year. This fall was mainly due to lower capex transfers to states, even as defence capex continued to remain strong. It stated, “We continue to expect the central government to meet its fiscal deficit target of 4.4 per cent of GDP for FY26 by reducing expenditure (likely capex), to offset potential income tax and GST shortfalls”.

In contrast, current expenditure rose sequentially because of higher interest payments, though it stayed lower compared with the same month last year.