India's fiscal deficit narrows to ₹4.75L crore in H1 FY25
What's the story
India's fiscal deficit for the first half of the ongoing financial year (April-September) has been pegged at ₹4.75 lakh crore, or 29.4% of annual estimates. This is a notable decline from last year's 39.3%. The government hopes to further cut this fiscal gap to 4.9% of GDP in this FY, down from 5.6% a year ago, government data released today showed.
Deficit drivers
Factors contributing to fiscal deficit reduction
The cut in fiscal deficit comes on the back of higher tax receipts, a dividend from the Reserve Bank of India (RBI), and restrained government capex during the quarter ending June 30 (Q1 FY25) due to general elections. Total receipts for April-September stood at ₹16.37 lakh crore while total expenditure was ₹21.11 lakh crore. These account for 51% and 43.8% of this fiscal year's budget target respectively.
Revenue breakdown
Revenue receipts and RBI's role in fiscal deficit reduction
Revenue receipts for the period stood at ₹16.22 lakh crore, including tax revenue of ₹12.65 lakh crore and non-tax revenue of ₹3.57 lakh crore. Tax and non-tax revenues were 49% and 65.5% of the budgeted estimate, respectively. The RBI contributed significantly to bolstering non-tax revenue by transferring a surplus of ₹2.11 lakh crore to the central government, more than double the budgeted amount from the central bank and state-run lenders.
Fiscal details
Revenue deficit and government expenditure on subsidies
The revenue deficit stood at ₹74,155 crore or 12% of the fiscal year's budget target, down from 26.6% last year. On the expenditure front, the government spent around ₹2.15 lakh crore on major subsidies like food, fertilizers, and petroleum. The number accounts for 56% of the annual aim, marginally higher than 55% of budgeted expenditure in the corresponding period last year.
Target outlook
Fiscal deficit target and economic growth expectations
Finance Minister Nirmala Sitharaman has set a lower fiscal deficit target of 4.9% for the next financial year, down from the interim budget's 5.1%. The revised target is premised on expectations of robust tax collections despite the government's ongoing capex drive, which is crucial for boosting consumption and job creation. The aim is to help India become the world's third-largest economy by 2030.