The Centre’s fiscal deficit more than halved to Rs 2.8 lakh crore or 17.2% of the annual target in the first four months of the current financial year compared with 33.9% in the year-ago period, due to a decline in capex and buoyant revenue receipts.
Due to a slowdown in government programmes due to general elections (in April-May), the Centre’s capex fell by 17.6% to Rs 2.6 lakh crore in April-July of FY25. Encouragingly, capex has doubled to Rs 80,200 crore in the month of July 2024 from Rs 38,600 crore in the year ago month.
To meet the FY25 budget estimate, Rs 8.5 lakh crore capex needs to be incurred in the last eight months of the year, an expansion of 34.6% on year, which appears quite challenging despite a pickup.
Revenue expenditure also fell by 2.3% on year in April-July 2024. The headroom of Rs 26.7 lakh crore left for revenue spending in August-March of FY25 is around 10% higher than the expenditure of Rs 24.3 trillion recorded in the year-ago period.
In April-July 2024, the net tax revenues rose by 23%, non-tax revenues expanded by 69% boosted by the RBI dividend.
“The outlook for revenue receipts seems fairly favourable, while there may be a miss on capex and disinvestment targets. Nevertheless, expenditure savings typically accumulated by ministries every year are likely to provide additional cushion to offset shortfall from other heads, if needed. Accordingly, ICRA expects the fiscal deficit to print in line or trail the FY2025 RBE of Rs 16.1 lakh crore or 4.9% of GDP,” said ICRA chief economist Aditi Nayar.
The Centre further pared the fiscal deficit target to 4.9% of GDP for FY25 in the full budget presented on July 23 from 5.1% projected in the interim Budget on February 1 as it used extra dividends from the RBI to trim borrowings as well as provide additional funds for development and welfare schemes.