The Government of India has reported a significant improvement in its fiscal deficit, which narrowed to 3 per cent of the full-year estimate for the current financial year (2024-25) in the first two months. That was a massive drop compared to 11.8 per cent recorded in the same period last fiscal, riding largely on robust revenue growth and increased dividends from the RBI, according to the latest available data.
Net direct tax revenues were at Rs 3.19 lakh crore during April-May, which is around 12 percent of the annual target, compared with Rs 2.78 lakh crore in the comparable period last year. Overall expenditure of the government was at Rs 6.23 lakh crore or around 13 percent of the annual target, slightly lower than the Rs 6.26 lakh crore spent during April-May 2023.
The spurt in net tax revenues of 15 per cent and non-tax revenues of 87 per cent was tipped by a large Rs 2.1 lakh crore dividend from the RBI to the government. At the end of May, the fiscal deficit came for Rs 50,615 crore, with a surplus of Rs 1.6 lakh crore seen in May alone. Total receipts were Rs 5.73 lakh crore while total expenditure was Rs 6.23 lakh crore.
According to Aditi Nayar, group chief economist at ICRA, "The Government of India witnessed a fiscal surplus of Rs 1.6 lakh crore in May 2024 due 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 percent of the FY2025 Interim Budget estimates in April-May FY2025 from Rs 2.1 lakh crore in April-May FY2024."
She further mentioned that while revenue expenditure increased by 4.7 percent year over year, capital expenditure contracted by 14.4 percent in this period, probably because of a temporary slowdown in execution due to the enforcement of the Model Code of Conduct for the Lok Sabha polls.
Further, the Ministry of Finance is eyeing a country's fiscal deficit of 4.5 per cent of GDP toward the close of FY26 from 5.1 per cent seen for the current financial year. Nayar added, "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."
The Comprehensive budget for 2024-25 the government is stated to present in the latter half of July.
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