Government Aims for Lower Fiscal Deficit in FY25 Amid Election Year Challenges

The domestic rating agency India Ratings and Research reports that India aims to achieve a fiscal deficit of 4.75% in FY25, reduced from initial targets, by controlling expenditure. The capital expenditure will be lower than estimated, and tax revenues are set to reach a 17-year high.

The government is on track to record a fiscal deficit of 4.75% in FY25, which is 0.19% lower than initially budgeted, thanks to efforts to curb expenditure, according to India Ratings and Research.

Revenue expenditure, excluding subsidies, will be slightly below the budget estimate, while government capital expenditure will be Rs 62,000 crore less than the projected Rs 11.11 lakh crore, though still a 10.6% year-on-year increase, reported Devendra Kumar Pant, agency's chief economist.

The deficit target faces challenges from the upcoming general elections in May 2024, which have already impacted capital expenditure growth, with the first half of FY25 showing a 15.42% dip. To meet FY25 targets, a 52.04% surge in the latter half is necessary.

Though the revenue from non-tax sources and disinvestment is projected to fall short, gross and net tax revenue is anticipated at 12.02% and 8.08% of GDP, marking a 17-year peak with income and corporate tax as major contributors.

(With inputs from agencies.)