On target: FY25 fiscal deficit at 4.8% of GDP
India's fiscal deficit met the 4.8% of GDP target in FY25, reaching ₹15.77 lakh crore due to higher nominal GDP. The government controlled revenue spending, offsetting lower tax revenue and increased capital expenditure. Analysts are optimistic about achieving the 4.4% deficit target for FY26, boosted by a record RBI dividend and strong April performance.
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New Delhi: The central government reined in its fiscal deficit at the targeted level of 4.8% of gross domestic product (GDP) in FY25, official data released Friday showed.Although in absolute terms, the fiscal gap touched ₹15.77 lakh crore in FY25, a tad higher than the revised estimate of almost ₹15.70 lakh crore, the targeted ratio was realised due to a higher-than-expected nominal GDP, showed the data. Nominal GDP touched ₹330.68 lakh crore in FY25, against the projected ₹324.11 lakh crore.The government, too, kept a lid on revenue spending, which nearly offset a shortfall in resource mop-up and an increase in capital expenditure last fiscal.Revenue expenditure in FY25 stood at ₹36.04 lakh crore, trailing the revised estimate of ₹36.98 lakh crore.Analysts said the Centre's goal of containing its deficit at 4.4% of GDP in the current fiscal seems all the more realistic now, especially after a record ₹2.69 lakh crore dividend transfer by the central bank earlier this month.The government had in 2021 set a target to bring down its fiscal deficit to 4.5% of GDP by FY26 (from 9.2% in the Covid year of FY21). In the budget for FY26, it aimed to lower that target to 4.4%.Capital spending, which had faltered in the early part of the last fiscal due to the general election and led to a cut in its initial target, hit Rs 10.52 lakh crore, exceeding the revised estimate of ₹10.18 lakh crore. Total expenditure in FY25 eased to ₹46.56 lakh crore from the revised estimate of ₹47.16 lakh crore, primarily due to lower revenue spending.The generous RBI dividend transfer will likely provide additional leeway of ₹60,000-70,000 crore to the government for enhanced expenditures, some analysts said. It may make up for any unaccounted for rise in defence expenditure on account of Operation Sindoor, they have said."The upward revision in the FY25 nominal GDP number also augurs well for meeting the deficit and debt-to-GDP targets for FY26," said ICRA chief economist Aditi Nayar.Total receipts touched ₹ 30.78 lakh crore in FY25, down from the revised estimate of Rs 31.47 lakh crore, thanks to lower-than-expected tax revenue.Net tax receipts eased about 2.3% from the revised estimate to ₹24.99 lakh crore, while non-tax revenue mop-up overshot the target marginally to touch ₹5.38 lakh crore.Meanwhile, the fiscal deficit in the first month of the current fiscal hit 11.9% of the full-year target, against 13% a year before, primarily on account of higher revenue as well as capital expenditure.In absolute terms, the April deficit touched ₹1.86 lakh crore, against ₹2.10 lakh crore a year before. The pace of capital spending in April shot 61% on-year to ₹ 1.60 lakh crore, while revenue expenditure dropped 5.7% to ₹3.06 lakh crore.
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