Centre's fiscal outlook faces geopolitical, revenue risks

Gist - Fiscal Challenge 2026–27 : Government faces lower tax collections due to tax-rate rationalisation and higher subsidies amid the West Asian crisis . - Revenue Response: Reliance on new cess, higher import duties and non-tax revenue , especially RBI dividends . - Macroeconomic Impact: Highlights how external shocks + tax reforms affect fiscal stability and Centre–State fiscal dynamics . Background - The fiscal health of the Union government is determined by the balance between its revenue receipts tax and non-tax and expenditures, guided by annual budget estimates. - Tax revenues collected by the Centre form the divisible pool, which is shared with states based on the recommendations of the Finance Commission , a constitutional body established under Article 280 . Cesses and surcharges are kept outside this divisible pool. - Prior to 2026-27, the government undertook extensive rate rationalisation in both Personal Income Tax PIT and Goods and Services Tax GST . The operating economic premise was that lower rates would expand the tax base and eventually increase overall collections, offsetting the initial revenue sacrifice. - Additionally, crude oil…