India’s fiscal deficit for April-September at 29.4% of FY25 target

India’s fiscal deficit for April-September stood at  ₹4.75 trillion, 29.4% of the estimate for 2024-25, according to the data released by the Controller General of Accounts (CGA) on Wednesday.

The latest figure is lower than ₹7.02 trillion a year ago due to higher tax receipts, Reserve Bank of India (RBI) dividend, and subdued government capex during the quarter that ended 30 June (Q1FY25) amid the general elections.

The central government's fiscal deficit target is 4.9% of the gross domestic product (GDP) for 2024-25, 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%.

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Receipts and expenditure

During the April-September period, net tax receipts stood at  ₹12.65 trillion, or 49% of the target set in the annual budget in July, against  ₹11.60 trillion in the same period of the previous year, the CGA data showed.

Total government expenditure during the period was  ₹21.11 trillion, or 43.8% of the annual target, against  ₹21.19 trillion in the year-ago period.

Capex stood at  ₹4.15 trillion during the period, or 37.3% of the annual estimate for 2024-25, from  ₹4.91 trillion reported during the year-ago period, or 49% of the annual estimates for 2023-24.

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During the April-September period, while non-tax revenue stood at  ₹3.57 trillion or 65.5% of the annual budget estimates, total revenue receipts stood at  ₹16.22 trillion, or 51.8% of the estimates for 2024-25.

Non-tax revenue stood at  ₹2.37 trillion, or 78.5% of the budget estimates, and total revenue receipts stood at  ₹13.97 trillion, or 53.1% of the estimates for the corresponding period of the previous fiscal.

Expert take

Experts pointed out that the Government of India's fiscal deficit declined during the first half of 2024-25, aided by the RBI dividend payment in the early part of the fiscal year and the contraction in capex during the June quarter due to general elections.

"After the lacklustre Q1 amidst the parliamentary elections, the Centre's capex expanded sharply in July in annual terms, but the momentum didn't sustain in the subsequent two months. Overall, capex rose by 10.3% on-year in Q2, which should support economic growth in that quarter," said Aditi Nayar, chief economist and head of research and outreach at Icra Ltd.

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"To meet the FY25 budget estimates, the central government needs to incur a capex of about ₹1.16 trillion per month during the second half of the fiscal, which entails a considerable expansion of 52% relative to the second half of 2023-24. This appears rather challenging, at this juncture, and we expect the capex target of ₹11.1 trillion for 2024-25 to be missed by a margin of at least ₹0.5 trillion," Nayar added.

Unprecedented dividend payout

The Indian 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 the RBI.

The ₹2.11 trillion disbursement 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 spending.

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This substantial payout aids the government’s adherence to its fiscal consolidation path, with the goal of lowering the deficit to 4.5% by 2025-26.