The Center has set a fiscal deficit target of 5.1 percent for FY25, or Rs 16.85 trillion, to achieve a fiscal deficit of 4.5 percent of GDP by FY26.
Aided by higher-than-expected tax revenues, the Union government has managed to limit the fiscal deficit – the gap between expenditure and revenue – to 5.6 per cent of gross domestic product (GDP) in 2023-24 (FY24), compared to revised estimates of 5.8 percent. per cent.
The fiscal deficit stood at Rs 16.54 trillion in FY24 against the budget target of Rs 17.86 trillion, according to government data released on Friday. The interim budget presented in February had revised the budget deficit estimate from the initial 5.9 percent of GDP to 5.8 percent for FY24. A budget deficit arises when government expenditure exceeds revenue.
According to the data, net tax revenues for FY24 were above projections at Rs 23.27 trillion. The total amount(s) spent that year was Rs 44.43 trillion, which was 99 percent of the budgeted amount. The fiscal deficit for April stood at 12.5 percent, or Rs 2.1 trillion, of the full-year target, due to unexpected revenue expenditure.
The Center has set a fiscal deficit target of 5.1 per cent for FY25, or Rs 16.85 trillion, to achieve a fiscal deficit of 4.5 per cent of GDP in FY26.
Economists expect fiscal dynamics to remain favorable this fiscal amid strong tax revenues and an unexpectedly large dividend payout by the Reserve Bank of India (RBI).
“The windfall accruing from the RBI dividend is likely to provide the government with an additional headroom of Rs 1 trillion for higher expenditure or sharper fiscal consolidation than what was planned in the interim budget for FY25,” ICRA chief economist Aditi Nayar said.
The RBI board last week approved the transfer of Rs 2.11 trillion ($25.35 billion) as surplus to the Union government for FY24.
As per FY25 interim budget estimates, the Bharatiya Janata Party-led government had budgeted a dividend of Rs 1.02 trillion from the central bank, state-owned banks and other financial institutions.
“Total expenditure has increased from about Rs 41.9 trillion to about Rs 44.4 trillion, an increase of about 6 percent, and yet the fiscal deficit has been reduced by about 5 percent. This can be attributed to the efficiency of the Central Board of Direct Taxes and the Central Board of Indirect Taxes & Customs and the areas covered in implementing Artificial Intelligence in detecting fake transactions,” said Vivek Jalan, Partner, Tax Connect Advisory Services LLP.
India’s direct tax collections grew 17.7 percent year-on-year to Rs 19.58 trillion in FY24, surpassing revised estimates by Rs 13,000 crore and budget estimates by Rs 1.35 trillion. Earlier, the government had forecast a net direct tax revenue of Rs 18.23 trillion for FY24, which was later revised upwards to Rs 19.45 trillion. GST collections for FY24 rose 11.7 percent to Rs 20.14 trillion.
First print: June 1, 2024 | 12:26 pm IST