India’s fiscal deficit for the April-November period was ₹8.47 trillion, 52.5% of the estimate for 2024-25, according to the data released by the Controller General of Accounts (CGA) on Tuesday.
The latest figure is lower than ₹9.07 trillion a year ago due to the Reserve Bank of India (RBI) dividend and subdued government capex during the first quarter amid the general elections, though tax receipts remained somewhat flat.
The Union government's fiscal deficit target is 4.9% of the gross domestic product (GDP) for 2024-25 (FY25), as announced by finance minister Nirmala Sitharaman in the Union Budget 2024-25 against 5.6% in 2023-24, which was lower than the revised estimates of 5.8%.
Receipts and expenditure
From April to November, net tax receipts stood at ₹14.43 trillion, or 56% of the target set in the annual budget in July, against ₹14.36 trillion in the same period of the previous year, CGA data showed.
Total government expenditure during the period was ₹27.41 trillion, or 57% of the annual target, against ₹26.52 trillion in the year-ago period.
Government capex (capital expenditure) stood at ₹5.13 trillion during the period, or 46.2% of the annual estimate for 2024-25, from ₹5.86 trillion reported during the year-ago period.
The data has factored in the slowdown in the government's capex during the first quarter due to the elections.
During the April-November period, non-tax revenue stood at ₹4.27 trillion or 78.3% of the annual budget estimates, against ₹2.84 trillion in the corresponding period of the previous fiscal.
Expert take
The net tax revenues, which rose by a marginal 0.5% annually during the April-November period, were dampened by the additional devolution of taxes to the states, while non-tax revenues expanded by about 50%, boosted by the RBI dividend, experts said.
During the period, the Centre's revenue expenditure grew by 7.8%, while capex continued to contract by 12.3%.
"The GoI’s capex needs to expand by 65% YoY in December 2024-March 2025 or record a monthly run rate of ₹1.5 trillion, to meet the FY2025 RBE, which appears increasingly daunting. We are apprehensive that the capex target of ₹11.1 trillion for FY2025 will be missed by a margin of at least ₹1-1.5 trillion,” said Aditi Nayar, chief economist and head of research and outreach at Icra Ltd. RBE is Revised Budget Estimate and YoY is year-on-year.
As things stand, the Centre's capital expenditure plans for FY25 stand at about ₹11.11 trillion, up from ₹10 trillion in the previous year.
"The anticipated miss in the capex target is expected to offset any shortfall on account of disinvestment and taxes, as well as the impact of the recent supplementary demand for grants. Accordingly, ICRA expects the fiscal deficit to mildly trail the FY2025 RBE of ₹16.1 trillion or 4.9% of GDP," Nayar added.
Unprecedented dividend payout
To be sure, the government’s tighter fiscal deficit target of 4.9% of GDP, outlined in July’s annual budget, is bolstered by an unprecedented dividend payout from RBI.
The ₹2.11 trillion disbursed by the central bank marks a 141% increase over last year’s dividend and provides a crucial buffer for 2024-25, offsetting potential shortfalls in tax revenue or hikes in public expenditure.
This substantial payout aids the government’s adherence to its fiscal consolidation path to lower the deficit to 4.5%, or lower, by 2025-26.
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