New Delhi, Nov 25 || India may need to slow down its spending growth in the second half of FY26 to stay on track with its fiscal deficit target, a new report said on Tuesday.
The data compiled by Morgan Stanley highlighted that while the government’s capital expenditure has been strong, revenue collections have been weaker than expected due to slow nominal GDP growth.
Morgan Stanley noted that in the first half of FY26, tax revenue growth was significantly below budget expectations.
Revenue collections grew just 4.5 per cent year-on-year (YoY), compared to the government’s full-year target of 12.6 per cent.
The slowdown is linked to low GDP deflator values and higher tax refunds. Direct tax collections grew only 3.1 per cent, while indirect taxes increased by 2.5 per cent, both far below their respective growth targets.