Understanding the Fiscal Deficit and Government Revenues in FY25
As reported on Wednesday, the Centre's fiscal deficit for the first half of FY25 narrowed to 29.4% of the total fiscal target. The fiscal deficit, representing the gap between government expenditure and revenue, hit Rs 4,74,520 crore by September-end, according to data from the Controller General of Accounts (CGA).
In comparison, this deficit was 39.3% of the Budget Estimates (BE) for the same period in 2023-24. The government is working to reduce the fiscal deficit to 4.9% of the GDP within this fiscal year, down from 5.6% the previous year. Maintaining a fiscal deficit of Rs 16,13,312 crore is projected for FY25.
The revenue-expenditure data currently indicates net tax revenue at Rs 12.65 lakh crore, equivalent to 49% of BE for FY25, slightly lower than the 49.8% reported at the end of September 2023. The total expenditure during these six months reached Rs 21.11 lakh crore or 43.8% of BE, showing a reduction from 47.1% year-on-year.
From this expenditure, Rs 16.96 lakh crore was allocated for revenue and Rs 4.15 lakh crore for capital accounts. Aditi Nayar, Chief Economist at ICRA, explained that the decline in fiscal deficit to Rs 4.7 lakh crore in H1 FY25, down from Rs 7 lakh during the same timeframe last year, can be attributed to early dividend payments from the Reserve Bank and a notable year-on-year decrease in capital expenditure.
Thus, the fiscal deficit serves as an important indicator of the total borrowing required by the government, highlighting overall economic health and stability.
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