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Informist, Friday, Jul. 3, 2026

 

By Priyasmita Dutta and Sagar Sen

 

NEW DELHI – The government has kept its projected net borrowing from the National Small Savings Fund at a "conservative level" in 2026-27 (Apr-Mar), providing it elbow room to borrow more than budgeted from it later in the year should the fiscal deficit come under strain, according to a senior finance ministry official. That said, the government does not currently expect fiscal slippage and draws comfort from a few levers to contain the deficit, such as potentially higher small savings collections and robust miscellaneous capital receipts from disinvestment and asset monetisation, a second official said. 

 

"Currently, we do not see the need to revisit the (fiscal deficit) budget figures," the first official said. "We will be better placed as things improve further on the global front," the official added. 

 

The Union Budget pegged the fiscal deficit for FY27 at 4.3% of GDP, or at INR 16.96 trillion. In March, Minister of State for Finance Pankaj Chaudhary had said that the fiscal deficit target for the year was pegged at 4.5% of GDP, based on the downward revision in India's nominal GDP in the new series with FY23 as the base year. To fund its fiscal deficit, the government aims to borrow INR 11.73 trillion from the market in FY27 on a net basis and INR 3.87 trillion from the small savings fund.

 

According to Budget estimates, small savings collections in FY27 are projected to grow 5% on year to INR 3.59 trillion, compared to the revised estimate of INR 3.42 trillion for FY26. However, the government's actual small savings collection in FY26 was over INR 1 trillion higher than the revised estimate. This means that based on actual collections, the government expects its small savings collection to fall nearly 20% in FY27. Economists have widely said that it is unlikely to fall and that the small savings collection target for FY27 is "conservative". 

 

The government had also projected its borrowing from the NSSF fund to rise only moderately to INR 3.87 trillion this year, compared to the revised estimate of INR 3.72 trillion for FY26. The actual borrowing from NSSF in FY26 was also sharply higher than the revised estimate. This means the government's borrowing from the small savings fund is expected to fall over 20% in FY27, which is also unlikely. 

 

As such, in the first two months of FY27, the government's small savings collections totalled INR 733.20 billion, 85% higher than the collections in the corresponding period a year ago. Historically, small savings collections tend to pick up pace in the final quarter of each fiscal year as more and more people rush to deposit their savings in these schemes, which come with tax benefits. 

 

The government's finances have been under pressure so far this year because of the war in West Asia, with some economists expecting the Centre to miss its fiscal deficit target for FY27. The fear of fiscal slippage is driven by a slowdown in tax collection and potential higher expenditure in the wake of supply bottlenecks and higher commodity prices due to the war.

 

In Apr-May, the government's fiscal deficit was over 12 times the year-ago figure. The fiscal deficit in Apr-May was INR 1.62 trillion, accounting for nearly 10% of the Budget estimate for FY27, compared to less than 1% of the Budget estimate of FY26 in the corresponding period a year ago. The sharp rise in the fiscal gap was due to 18% growth in total expenditure and a 2% drop in revenue. The government's total expenditure in the first two months of the financial year was INR 8.81 trillion, while total receipts were at INR 7.19 trillion.  End

 

Edited by Avishek Dutta

 

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