Budget 2024: Govt pegs fiscal deficit target at 5.1% of GDP for FY25

The government expects fiscal deficit to be 5.1 per cent of the gross domestic product (GDP) for the financial year 2024-2025 (FY25), Finance Minister Nirmala Sitharaman said in her Budget 2024 speech on Thursday, February 1. To finance the fiscal deficit in FY25, the gross and net market borrowings through dated securities during 2024-25 are estimated at ₹14.13 and 11.75 lakh crore respectively- both less than that in FY24.

Also Read: Budget 2024 key announcements

"We continue on the path of fiscal consolidation, as announced in my Budget Speech for 2021-22, to reduce fiscal deficit below 4.5 per cent by 2025-26. The fiscal deficit in 2024-25 is estimated to be 5.1 per cent of GDP, adhering to that path," the finance minister said in her Budget speech.

"Coming to 2024-25, the total receipts, other than borrowings, and the total expenditure are estimated at ₹30.80 and ₹47.66 lakh crore respectively. The tax receipts are estimated at ₹26.02 lakh crore" Sitharaman said.

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The finance minister also revised the fiscal deficit target for FY24 to 5.8 per cent of GDP.

"The revised estimate of the fiscal deficit is 5.8 per cent of GDP, improving on the Budget estimate, notwithstanding moderation in the nominal growth estimates," the finance minister said.

The finance minister highlighted that the revised estimate of the total receipts, other than borrowings, is ₹27.56 lakh crore, of which the tax receipts are ₹23.24 lakh crore. The revised estimate of the total expenditure is ₹44.90 lakh crore.

"The revenue receipts at ₹30.03 lakh crore are expected to be higher than the Budget estimate, reflecting strong growth momentum and formalisation in the economy," said the finance minister.

Also Read: Budget 2024: Govt focused on GDP - Governance, Development and Performance, says FM Nirmala Sitharaman

Fiscal deficit is the difference between the total income and the total expenditure of the government in a year. It can be reduced by increasing tax collections, by borrowing, or by other means. Total additional borrowings are made by the government every year to bridge the gap between its income and expenditure.

The government’s fiscal deficit during the first nine months of the current financial year (FY24) stood at ₹9.82 trillion, or 55 per cent of the annual estimate of ₹17.87 trillion, according to data released by the Controller General of Accounts on Wednesday, January 31.

Despite a jump in government spending to boost economic growth, the fiscal deficit declined, thanks to higher tax receipts and an increase in non-tax revenue.

Total receipts during the period stood at ₹20.72 trillion, or 76.3 per cent of the annual estimate, of which tax receipts stood at ₹17.30 trillion, or 74.2 per cent of the annual estimate. Non-tax revenue stood at ₹3.12 trillion, or 103.5 per cent of the annual estimate.

Total expenditure rose to ₹30.54 trillion, or 67.8 per cent of the annual estimate, from ₹28.18 trillion in the corresponding period in FY23.

Also Read: April-December fiscal deficit at ₹9.82 trillion, reaches 55% of annual estimate 

India’s fiscal deficit has been narrowing after skyrocketing in FY21 because of COVID-related expenditure. From 9.2 per cent in FY21, it shrank to 6.4 per cent in FY23.

In her last year's Budget speech, Sitharaman said India aimed to narrow the fiscal deficit to 5.9 per cent of GDP in FY24 from 6.4 per cent in the last financial year. Today, the finance minister trimmed the fiscal deficit target for FY24 to 5.8 per cent of GDP. 

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