India on Track to Achieve Fiscal Deficit Target of 4.8% for FY25: Report

A Bank of Baroda report anticipates that India will meet its fiscal deficit target of 4.8% of GDP for FY25 due to robust GDP growth, stable revenue, and controlled spending. Despite some tax collection challenges, strong indirect taxes and disciplined ministry expenditures contribute to fiscal discipline.

India's central government is poised to meet its fiscal deficit target of 4.8% of GDP for the financial year 2024-25, a report from Bank of Baroda reveals. The assessment credits a higher-than-anticipated nominal GDP growth, steady revenue streams, and controlled expenditure increases as key contributors to this expected achievement.

The report indicates a projected nominal GDP growth rate of 9.9%, surpassing the previously estimated 9.7% from the Union Budget. This growth is pivotal as it enhances revenue collection, thereby aiding in managing the fiscal deficit. Although initial government spending was delayed due to general elections, the latter half of the fiscal year saw spending pace match targets, preventing major deviations.

In terms of revenue, indirect tax collections, especially from customs duties and Central Goods and Services Tax, have improved, offsetting the slackness in corporate tax collections. Stable income tax revenues further bolster this positive outlook. By January 2025, the government had used 75.7% of its revised expenditure estimate. Several ministries have increased their spending, yet are anticipated to moderate expenditure as they near their targets. Bank of Baroda envisions the government maintaining fiscal discipline through the end of FY25.

(With inputs from agencies.)