India's Fiscal Landscape: Analyzing the 2025 Deficit Milestone

India's fiscal deficit reached 74.5% of the annual target by January 2025, totaling Rs 11.69 lakh crore. The fiscal strategy includes increased capital expenditure and a GDP deficit goal of 4.8% for 2024-25, with Rs 10.74 lakh crore transferred to states. Minor deviations from budget targets remain possible.

The Centre's fiscal deficit reached a significant 74.5% of its annual target by the end of January 2025, as disclosed by the Controller General of Accounts. The shortfall was Rs 11.69 lakh crore during the April-January 2024-2025 period, reflecting a jump compared to the deficit of 63.6% from the previous fiscal year's Revised Estimates.

Revenue data highlighted Rs 19.03 lakh crore in tax earnings, equivalent to 74.4% of the 2024-25 RE, marking a decrease from 80.9% in the same period last year. A total expenditure of Rs 35.7 lakh crore was reported, comprising 75.7% of the RE for the period. The fiscal deficit for 2024-25 is positioned at 4.8% of GDP, a slight reduction from an earlier 4.9% estimate.

ICRA's chief economist, Aditi Nayar, anticipates continued fiscal expansion, with capital expenditure needing to expand by 15% year-on-year in the concluding months of FY25 to align with fiscal targets. Revenue transfers to state governments saw a significant rise, underscoring the Centre's fiscal policy to bolster economic activity.

(With inputs from agencies.)