New Delhi: India began the 2026-27 financial year with robust government spending outpacing revenue collections, reflecting the Centre’s continued push on infrastructure and welfare even as it remains committed to fiscal consolidation. At the same time, the government has extended customs duty relief on critical petrochemical imports to shield manufacturers from lingering disruptions linked to geopolitical tensions in West Asia.
Data released by the Controller General of Accounts (CGA) showed that the Government of India received ₹7,18,669 crore in total receipts during April-May, equivalent to 19.7% of the Budget Estimate (BE) for 2026-27. During the same period, the Centre incurred ₹8,81,023 crore in expenditure, or 16.5% of the full-year budget target, indicating that government spending has remained front-loaded at the start of the fiscal year.
The figures provide an early snapshot of the government’s fiscal position and suggest that New Delhi is maintaining its strategy of supporting economic growth through public expenditure while gradually narrowing the fiscal deficit over the course of the year.
The government’s total receipts comprised ₹3,48,138 crore in net tax revenue, ₹3,50,867 crore in non-tax revenue and ₹19,664 crore in non-debt capital receipts.
The unusually strong non-tax revenue collection in the first two months reflects the importance of dividend income, spectrum and licence fees, and other government earnings in supplementing tax collections during the early part of the fiscal year. Tax revenues, meanwhile, are expected to strengthen in subsequent months as advance tax payments, corporate taxes and GST collections continue to gather momentum.
One notable feature of the latest fiscal data is the higher transfer of tax revenues to states. The Centre devolved ₹1,75,557 crore to state governments during April and May under the Finance Commission’s tax-sharing arrangement. This is ₹12,086 crore more than the amount transferred during the corresponding period last year.
Higher tax devolution improves the fiscal capacity of state governments, enabling them to finance infrastructure projects, welfare programmes and development spending without relying excessively on market borrowings. States account for a significant share of India’s public capital expenditure, making timely transfers from the Centre an important source of financial stability.
Government expenditure also remained elevated during the first two months of the fiscal year. Of the total spending of ₹8,81,023 crore, ₹6,30,020 crore was incurred on the revenue account, while ₹2,51,003 crore was spent under the capital account.
Capital expenditure is closely watched by economists because it creates long-term productive assets such as roads, railways, ports, airports, power infrastructure and urban facilities. The Centre has increasingly prioritised capital spending over the past several budgets, arguing that investment-led growth generates stronger multiplier effects than consumption-oriented expenditure.
The latest numbers indicate that this investment push has continued into the new financial year even as the government balances competing demands on the budget.
Revenue expenditure, meanwhile, continued to be dominated by mandatory commitments. Interest payments alone amounted to ₹1,81,461 crore, accounting for nearly one-third of total revenue expenditure during April-May. The figures underscore the significant debt-servicing burden carried by the central government despite ongoing efforts to reduce the fiscal deficit over the medium term.
Major subsidies totalled ₹75,542 crore during the first two months. These include expenditure on food, fertiliser and petroleum-related support schemes that remain critical components of India’s social protection framework while also helping moderate inflationary pressures for households and businesses.
The fiscal data comes at a time when policymakers are navigating a challenging global environment marked by geopolitical uncertainty, volatile commodity prices and uneven global growth. While domestic economic fundamentals remain relatively resilient, the government continues to rely on targeted fiscal measures to support growth without significantly derailing its consolidation roadmap.
Centre Extends Petrochemical Duty Relief
In a separate policy decision, the government extended the full customs duty exemption on imports of specified critical petrochemical products until July 15, 2026, providing additional relief to industries that continue to face supply constraints following the conflict in West Asia.
The exemption had originally been introduced as a temporary measure until June 30 after the conflict disrupted global petrochemical supply chains. During this period, Indian petroleum companies were asked to prioritise the production of liquefied petroleum gas (LPG), resulting in tighter domestic availability of certain petrochemical feedstock and intermediates.
According to the government, conditions are gradually returning to normal. However, policymakers have opted for a further 15-day extension to ensure a smooth transition and avoid sudden disruptions in supplies for downstream industries.
The list of petrochemical products eligible for the exemption remains unchanged from the earlier notification.
The duty waiver is expected to continue supporting a broad cross-section of India’s manufacturing sector. Industries that rely heavily on petrochemical feedstock — including plastics, packaging, textiles, pharmaceuticals, specialty chemicals and automotive component manufacturers — are likely to benefit from lower import costs and improved availability of raw materials.
Industry participants have argued that uninterrupted access to these inputs is essential because many downstream manufacturers operate integrated production cycles where even temporary shortages can disrupt output, raise production costs and delay deliveries.
The government’s decision also reflects its broader effort to insulate domestic manufacturers from external shocks without resorting to broad-based fiscal support. By temporarily lowering import costs, policymakers aim to maintain production, prevent supply bottlenecks and contain inflation in finished goods that depend on petrochemical inputs.
Consumers could also benefit indirectly if manufacturers pass on lower raw material costs through more stable prices for products ranging from plastic packaging and consumer goods to textiles, pharmaceuticals and automobile components.
Taken together, the latest fiscal data and the extension of customs duty relief illustrate the government’s twin policy priorities. On one hand, New Delhi continues to deploy public spending — particularly capital expenditure — to sustain economic momentum and strengthen long-term growth prospects. On the other, it is using targeted trade and tax measures to mitigate the impact of external geopolitical shocks on domestic industry.
As the fiscal year progresses, markets will closely watch whether revenue collections accelerate sufficiently to offset the government’s early spending momentum and keep the fiscal deficit within the budgeted target, while also monitoring how long temporary support measures linked to the West Asia conflict remain necessary as global supply chains continue to stabilise.