India’s fiscal deficit hits 17.2% at ₹2.77 lakh crore of FY25 target in April-July: CGA

India's fiscal deficit at the end of the first four months of the current fiscal year (April-July for FY25) touched 17.2 per cent of the full-year target. According to data released by the Controller General of Accounts (CGA) on Friday, August 30, the fiscal deficit—the gap between expenditure and revenue—was ₹2,76,945 crore as of July end in absolute terms. The deficit stood at 33.9 per cent of the Budget Estimates (BE) in the corresponding period of 2023-24. 

In the Union Budget 2024, the government projected to bring down the fiscal deficit to 4.9 per cent of the gross domestic product (GDP) in the current 2024-25 financial year. The fiscal deficit was 5.6 per cent of the GDP in 2023-24. In absolute terms, the government aims to contain the total fiscal deficit at ₹16,13,312 crore during the current fiscal (2024-25).

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Fiscal Deficit in April-July FY25: Key metrics

A fiscal deficit is the difference between total expenditures and government revenue. It indicates the total borrowing that the government needs. Per the government's revenue-expenditure data for the first four months of 2024-25, CGA said the net tax revenue was ₹7.15 lakh crore, or 27.7 per cent of the BE for the current fiscal. 

The central government's total expenditure in the four months through July stood at ₹13 lakh crore or 27 per cent of BE. The expenditure was 30.7 per cent of the BE in the year-ago period. Of the total expenditure, ₹10,39,091 crore was in the revenue account, and ₹2,61,260 crore was in the capital account. 

Of the total revenue expenditure, ₹3,27,887 crore was for interest payments and ₹1,25,639 crore for major subsidies. CGA said ₹3,66,630 crore had been transferred to state governments as the Centre devolved its share of taxes to July, which is ₹57,109 crore higher than the previous year.

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Commenting on the fiscal deficit data, Aditi Nayar, Chief Economist, Head - Research and Outreach at ICRA Ltd said, "The Government of India's fiscal deficit more than halved to Rs. 2.8 trillion or 18 per cent of the FY2025 BE in April-July FY2025, from Rs. 6.1 trillion in April-July FY2024, led by a contraction in capital expenditure during the Election months and the substantial dividend received from the RBI.''

In April-July FY2025, the net tax revenues rose by 23 per cent, and non-tax revenues expanded by 69 per cent, boosted by the Reserve Bank of India (RBI)'s dividend amidst a year-on-year (YoY) contraction in both revenue expenditure (2.3 per cent) and capex (17.6 per cent).

‘’Encouragingly, with the completion of the Parliamentary Elections, the GoI's capex doubled to Rs. 802 billion in July 2024 from Rs. 386 trillion in July 2023, and even exceeded the average of Rs. 604 billion seen in Q1 FY2025,'' said Nayar.

‘’Nevertheless, to meet the FY2025 BE, Rs. 8.5 trillion of capex needs to be incurred in the last eight months of the year, an expansion of 34.6 per cent relative to the same period of FY2024 (Rs. 6.3 trillion). This appears quite challenging, even though we expect a pickup after the budget presentation and the withdrawal of the monsoons,'' she added.

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According to the economist, the headroom of Rs. 26.7 trillion left for revenue spending in August-March FY2025 is ~10 per cent higher than the expenditure of Rs. 24.3 trillion recorded in the year-ago period. 

The outlook for revenue receipts seems fairly favourable, while there may be a miss on capex and disinvestment targets. Expenditure savings typically accumulated by ministries yearly will likely provide additional cushion to offset the shortfall from other heads, if needed. ICRA expects the fiscal deficit to print in line or trail FY2025 RBE of Rs. 16.1 trillion or 4.9 per cent of GDP. 

Separate government on Friday showed that India's gross domestic product (GDP) for the April-June quarter of fiscal 2024-25 (Q1FY25) hit a 15-month low of 6.7 per cent compared to 8.2 per cent in the year-ago period over soft government spending and low consumer spending.

Despite India's GDP growth hitting a five-quarter low in the first quarter of the current fiscal, India still remains the fastest-growing major economy in the world, as China's GDP growth in the April-June quarter came in at 4.7 per cent.