NTI: India’s fiscal deficit has significantly narrowed to ₹4.75 lakh crore for the first half of the current fiscal year (H1 FY25), representing 29.4% of the FY25 target, according to data released by the Controller General of Accounts. This marks an improvement over the deficit of ₹7.02 lakh crore recorded in the same period last year. The narrowing of the fiscal gap has been attributed to higher tax receipts, an early dividend payout from the Reserve Bank of India (RBI), and reduced capital spending due to election-related constraints.
Fiscal Target for FY25 Lowered to 4.9% of GDP
The fiscal deficit target for FY25 has been set at 4.9% of GDP, down from 5.6% last year and lower than the revised estimate of 5.8%. This move is part of the government’s commitment to fiscal consolidation while addressing spending priorities.
Strong Revenue Performance Led by Tax Collections
The data reveals that the central government received ₹16.36 lakh crore up to September 2024, which is slightly more than half of the estimated receipts for FY25. Of this total, approximately 77% (or ₹12.65 lakh crore) came from tax revenue, underscoring the critical role of tax collection in financing government expenditures. Non-tax revenue sources contributed 21% (or ₹3.57 lakh crore), mainly from dividends, interest on loans, and various fees. A smaller portion, about 1% or ₹14,601 crore, came from non-debt capital receipts.
Increase in Tax Revenue Allocation to States
A third of the total receipts, amounting to ₹5.44 lakh crore, was transferred to state governments under the category of “Devolution of Share of Taxes by the Government of India.” This marks an almost 20% increase over the previous year, with an additional ₹89,359 crore allocated compared to the same period last year.
Expenditure Analysis: Revenue vs. Capital Outlay
On the expenditure front, the central government spent a total of ₹21.11 lakh crore, accounting for 43.8% of the budgeted estimate for FY25. The majority (80% or ₹16.96 lakh crore) was allocated to revenue expenditure, while 20% (₹4.14 lakh crore) was used for capital expenditure. Within the revenue segment, interest payments constituted 30%, amounting to ₹5.15 lakh crore, while 12% (₹2.14 lakh crore) went towards key subsidies, reflecting the government’s focus on meeting existing financial obligations, debt servicing, and critical subsidies.
Monthly Receipts and Expenditure Insights
For the preceding month, the central government recorded receipts totaling ₹12.17 lakh crore, or 38% of the FY25 budgeted estimate, up to August. This included ₹8.73 lakh crore in tax revenue, ₹3.34 lakh crore in non-tax revenue, and ₹8,866 crore in non-debt capital receipts.
Outlook: Government to Balance Fiscal Discipline and Expenditure
As the fiscal year progresses, the narrowing fiscal deficit in H1 FY25 reflects effective revenue generation and prudent expenditure management. The government’s focus will remain on balancing fiscal discipline with essential spending commitments, especially as it approaches the year-end with an eye on growth and election commitments.
