Moody’s Ratings on Tuesday said India’s revenue growth has been under pressure due to government tax cuts in the current financial year, limiting its ability to provide additional support to the economy through fiscal policy. According to PTI news, Moody’s Ratings Vice President and Senior Credit Officer (Sovereign Risk) Martin Petch said in a webinar that revenue growth has been quite weak. There also appear to be some limits on fiscal consolidation, with recent tax cuts further weighing on revenues. Because of this, the scope for providing additional financial support to the economy has reduced.
Decline in tax collection
According to data from the Controller General of Accounts (CGA), the net tax revenue by the end of September 2025 stood at ₹12.29 lakh crore. It was ₹12.65 lakh crore in the same period last year. The government was able to achieve only 43.3% of its FY26 budget target by September 2025, compared to 49% in the same period last fiscal.
Major tax reliefs from the government
Big relief in income tax
The income tax exemption limit was increased from ₹7 lakh to ₹12 lakh under the new tax structure in the Budget 2025-26. This provided tax relief of approximately ₹1 lakh crore to the middle class.
GST rates reduced on 375 items
GST rates were cut on about 375 items from September 22, so that common consumer goods became cheaper and consumption increased.
fiscal deficit target
The government aims to reduce fiscal deficit to 4.4% of GDP in the current financial year.
Support will come from consumption and monetary policy
According to Martin Petch, softening of inflation and relaxation of monetary policy, both these factors will increase domestic consumption and will give new impetus to consumption. He said that we are expecting stable but moderate economic growth next year.
Interest rates and inflation levels
The RBI cut policy interest rates by 50 basis points (0.50%) in June, to a three-year low of 5.5%. Retail inflation declined to a historic low of 0.25% in October, including the impact of GST cuts.
impact of us tariffs
Petch said domestic consumption and infrastructure investment are the main forces of India’s economic growth, which will largely balance the impact of the 50% import duty imposed on India by the US. However, he warned that if these charges continue for a long time, investment could be affected.
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