India’s fiscal deficit registers steep fall in first 2 months of 2024-25

NEW DELHI: The Centre’s fiscal deficit narrowed to 3 per cent of the full-year estimate in the first two months of the current financial year (2024-25) compared to 11.8 per cent during the same period of the previous fiscal on the back of strong revenue growth and higher dividend from the RBI, official data released on Friday showed.

Net tax revenues in April-May stood at Rs 3.19 lakh crore, or 12 per cent of the annual target, which is higher than the corresponding figures of Rs 2.78 lakh crore in the same period last year.

The government's total expenditure in the same period was Rs 6.23 lakh crore, or about 13 per cent of the annual target. In April-May 2023, the overall expenditure was Rs 6.26 lakh crore.

While net tax revenues rose 15 per cent, non-tax revenues increased 87 per cent owing to the huge Rs 2.1 lakh crore RBI dividend to the government.

In value terms, the fiscal deficit until May was Rs 50,615 crore, owing to a surplus of Rs 1.6 lakh crore in May, with total receipts at Rs 5.73 lakh crore and total expenditure at Rs 6.23 lakh crore.

"The Government of India witnessed a fiscal surplus of Rs 1.6 lakh crore in May 2024 owing to the large RBI dividend transfer of Rs 2.1 lakh crore that month. This pulled down the fiscal deficit to Rs 50,615 crore or a mere 3 per cent of the FY2025 Interim Budget estimates in April-May FY2025, from Rs. 2.1 lakh crore in April-May FY2024," said ICRA chief economist Aditi Nayar.

While revenue expenditure rose by 4.7 per cent YoY, capex contracted by 14.4 per cent during this period, likely dampened by a temporary pause in execution amid the Model Code of Conduct for the Lok Sabha polls, she added.

The Finance Ministry aims to narrow the country’s fiscal deficit to 4.5 per cent of gross domestic product by the end of FY26, from the 5.1 per cent projected in the current financial year.

"The revenue upside seen from non-tax, and to a smaller extent, tax receipts suggest headroom to both boost expenditure and target a faster fiscal consolidation than what was pencilled in the Interim Budget for FY25," said Nayar.

The government is expected to present the full budget for 2024-25 in the second half of July.