India's fiscal deficit decreases significantly to 8% of annual target
India's fiscal deficit, a crucial indicator of its financial health, has narrowed significantly in the first quarter of FY25. The deficit, which represents the gap between government spending and revenue, stood at 8.1% of the full-year target for FY25. This marks a substantial decrease from the same period last year when it stood at 25.3%. The fiscal deficit for Q1 FY25 stood at ₹1.36 lakh crore.
RBI dividend and revenue receipts help contain deficit
The fiscal deficit was calculated at 8.4% of a target of ₹16.13 lakh crore, based on interim Budget numbers for estimates released on July 23. A higher-than-expected RBI dividend of ₹2.11 lakh crore has played a significant role in containing the fiscal deficit. This was further aided by an increase in revenue receipts and subdued capital spending during this period.
Revenue receipts and tax revenue see an increase
Revenue receipts for the first quarter were higher at ₹8.3 lakh crore or 26.5% of the full-year target based on new Budget numbers, compared with 22.4% in Q1 FY24. Tax revenue also saw an increase, reported at 21% of the full-year estimate, up from 18.6% in the previous year. However, capital expenditure (Capex) utilization was lower at 16.3% of Budget estimates compared with 27.8% in Q1 FY25.
Government spending and loan disbursement in Q1 FY25
Loans disbursed in the first quarter amounted to ₹30,009 crore, which is just 17.5% of the target compared with 27.2% in Q1 of the previous fiscal year. Overall, government spending accounted for 20% of its total expenditure of ₹48.2 lakh crore budgeted for the current fiscal year. These figures provide an insight into the government's financial management during this period.
Government aims to further reduce fiscal deficit
In its July 23 Budget announcement, the government further reduced its fiscal deficit target to 4.9% of GDP from the 5.1% target set in the interim Budget. Union Finance Minister Nirmala Sitharaman stated that the government aims to further reduce the fiscal deficit to 4.5% or below by FY26. This indicates a continued focus on fiscal consolidation in the coming years.
