India's FY24 fiscal deficit improves to 5.63% of GDP, narrower than government's target of 5.8%

The government's fiscal deficit for 2023-24 stood at 5.63 per cent of the GDP, marginally better than the 5.8 per cent estimated in the Union Budget, according to data released by the Controller General of Accounts (CGA) on Friday, May 31. In actual terms, the fiscal deficit--the gap between expenditure and revenue, was at ₹16.53 lakh crore.

In the revised estimate for 2023-24, the government projected a fiscal deficit of ₹17.34 lakh crore, which is 5.8 per cent of the GDP, as announced by Finance Minister Nirmala Sitharaman in the interim Budget tabled on February 1, 2024 in Parliament.

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The government managed to meet the revenue collection target. The net tax collection was at ₹23.26 lakh crore in FY24, while the expenditure stood at ₹44.42 lakh crore. The government's revenue collection was 101.2 per cent of the revised estimates (RE) presented in the Budget. The expenditure worked out to be ₹44.42 lakh crore. The expenditure in FY24 was 99 per cent of the RE.
 

FY24 fiscal deficit and FY25 target

CGA data also showed that revenue deficit during FY24 was 2.6 per cent of the GDP and effective revenue deficit was 1.6 per cent. ICRA Chief Economist Aditi Nayar said the government's fiscal deficit was contained below the RE for FY24, benefiting from higher-than-anticipated receipts and lower-than-estimated revenue spending, with only a marginal miss in capital expenditure.

For the current financial year (FY25), the government estimates the fiscal deficit at 5.1 per cent of the GDP, or ₹16,85,494 crore. According to the Fiscal Responsibility & Budget Management (FRBM) Act, the government plans to achieve a fiscal deficit of 4.5 per cent in 2025-26.

During 2023-24, the government received ₹27,88,872 crore (101.2 per cent of corresponding RE of total receipts) comprising ₹23,26,524 crore tax revenue (net to Centre), ₹4,01,888 crore of non-tax revenue and ₹60,460 crore of non-debt capital receipts. ₹11,29,494 crore was transferred to the states.

The total expenditure incurred by the central government was ₹44,42,542 crore (98.9 per cent of corresponding RE of 2023-24), of which ₹34,94,036 crore was on revenue account and ₹9,48,506 crore on capital account. Out of the total revenue expenditure, ₹10,63,871 crore was for interest payments and ₹4,13,542 crore for major subsidies. 

ICRA's Nayar said while the fiscal deficit for April 2024 has spiked on account of an unexpected surge in revenue spending, in spite of healthy tax revenues, the higher-than-budgeted dividend from the Reserve Bank of India (RBI) is likely to dampen the fiscal deficit in the rest of this quarter. ‘’Overall, the fiscal dynamics appear favourable for FY25, amid continued resilience in GST collections and an unexpectedly large dividend payout by the RBI,'' she added.

Vivek Jalan, Partner at Tax Connect Advisory Services LLP, a multi-disciplinary consulting firm told news agency PTI that lower fiscal deficit is majorly due to the uptick in tax revenues. "The encouraging fiscal deficit numbers can be dedicated to the taxpayers of the country,'' he said.

‘’The efficiency of the CBDT and CBIC and especially the ground covered in implementation of Artificial intelligence in unearthing fake transactions have also to be appreciated by honest taxpayers," added Jalan.

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India FY24 GDP Data

Separate government data showed today that India's GDP for the January-March quarter of fiscal 2023-24 (Q4FY24) came in at 7.8 per cent, driven by strong growth in the manufacturing sector. The Indian economy beat D-Street estimates and grew by 8.2 per cent for the full year (FY24). Economists expect the momentum to remain strong this year.

The world's most populous country also retains its crown as the fastest-growing major economy driven by robust demand and government infrastructure spending. Strong growth in the manufacturing and mining sectors contributed to India's annual growth numbers, which beat both government and analyst projections.

‘’India’s GDP numbers came in at 8.2 per cent for FY24 and 7.8 per cent for Q4 of FY24. This is particularly welcome because the expected Q4 GDP growth rate was around 6.7 per cent-7 per cent,'' said Dr. Manoranjan Sharma , Chief Economist - Infomerics Ratings.

‘’Indian economy continues to be resilient and buoyant despite global headwinds, e.g., heightened global tension because of Israeli- Hamas/ Iran war, slow growth across countries, geopolitical fragmentation and volatility in oil prices. India is likely to grow by seven per cent in FY25.

Welcome that India's FY24 fiscal deficit is at ₹16.54 lakh crore, 95.3 per cent of the revised estimates. Such outperformance will consolidate its India’s position in the global pecking order and will have a salubrious impact on economic growth, structural transformation and distributive equity,'' added Dr Sharma.