India's fiscal deficit for the first four months of the 2024-25 financial year, from April to July, has reached 17.2% of the full-year target. According to data released by the Controller General of Accounts (CGA) on August 30, the fiscal deficit, which represents the gap between government spending and revenue, stood at ₹2.77 lakh crore by the end of July. In the same period last year, the deficit was 33.9% of the Budget Estimates (BE) for 2023-24.
The Union Budget for 2024 aims to reduce the fiscal deficit to 4.9% of the gross domestic product (GDP) for the 2024-25 fiscal year, down from 5.6% in 2023-24. The government plans to limit the total fiscal deficit to ₹16.13 lakh crore during this fiscal year.
Key Details of the Fiscal Deficit in April-July FY25:
The fiscal deficit represents the difference between total government spending and revenue, indicating the amount the government needs to borrow. According to the CGA, net tax revenue for the first four months of 2024-25 was ₹7.15 lakh crore, or 27.7% of the BE for the fiscal year.
The central government's total spending during this period was ₹13 lakh crore, accounting for 27% of BE, compared to 30.7% in the same period last year. Out of this, ₹10.39 lakh crore was spent on revenue accounts, while ₹2.61 lakh crore was allocated to capital accounts.
Of the revenue expenditure, ₹3.28 lakh crore was allocated to interest payments, and ₹1.26 lakh crore was used for major subsidies. Additionally, ₹3.67 lakh crore was transferred to state governments as the Centre's share of taxes up to July, which is ₹57,109 crore more than the previous year.
Expert Insights on Fiscal Deficit Data:
Aditi Nayar, Chief Economist and Head of Research and Outreach at ICRA Ltd, noted that the fiscal deficit for the Government of India decreased to ₹2.8 trillion or 18% of the FY2025 BE in April-July FY2025, compared to ₹6.1 trillion in the same period of FY2024. This reduction was attributed to lower capital expenditure during election months and a significant dividend from the Reserve Bank of India (RBI).
Net tax revenues increased by 23%, and non-tax revenues surged by 69%, driven by the RBI's dividend. However, both revenue expenditure and capital expenditure saw year-on-year declines of 2.3% and 17.6%, respectively.
Nayar also highlighted that the government's capital expenditure doubled to ₹80,200 crore in July 2024 from ₹38,600 crore in July 2023, surpassing the average of ₹60,400 crore seen in Q1 FY2025. However, to meet the FY2025 BE, the government needs to spend ₹8.5 trillion on capital expenditure in the last eight months of the fiscal year, a 34.6% increase from the same period in FY2024. This target is challenging, though a pickup in spending is expected after the budget presentation and the end of the monsoon season.
Nayar added that the ₹26.7 trillion headroom left for revenue spending from August to March FY2025 is approximately 10% higher than the ₹24.3 trillion spent during the same period last year. While revenue receipts are expected to be strong, the government may fall short of its capital expenditure and disinvestment targets. However, ministries' usual expenditure savings could help offset any shortfall.
ICRA anticipates the fiscal deficit to align with or fall short of the FY2025 Revised Budget Estimates (RBE) of ₹16.1 trillion, or 4.9% of GDP.
Additionally, separate government data released on Friday showed that India's GDP growth for the April-June quarter of FY2024-25 was 6.7%, the lowest in 15 months, down from 8.2% in the same period last year. This decline was attributed to reduced government and consumer spending. Despite the slowdown, India remains the fastest-growing major economy globally, with China's GDP growth at 4.7% during the same period.