Budget 2024: FM Sitharaman reduces fiscal deficit for FY25 to 4.9% of GDP

New Delhi, July 23 2024 

This is 20 basis points lower than 5.1 per cent announced in the interim budget 

Finance Minister Nirmala Sitharaman on Tuesday announced the revised fiscal deficit target for 2024-25 of 4.9 per cent of the Gross Domestic Product (GDP). This is 20 basis points lower than 5.1 per cent announced in the interim budget.

Fiscal deficit is the difference between the expenditure and receipts of the government in a year. Sitharaman said that the total receipts for FY25 have been estimated at Rs 32.07 trillion. The total expenditure has been pegged at Rs 48.21 trillion.

Sitharaman also said that the gross and net market borrowing for 2024-25 has been pegged at Rs 14.01 trillion and Rs 11.63 trillion respectively. She added that the net tax receipts in the year have been estimated at Rs 25.83 trillion.

In her Budget speech, Sitharaman said that Centre would aim to reach 4.5 per cent fiscal deficit in 2025-26.

Most experts had suggested that the Centre may keep fiscal deficit unchanged at 5.1 per cent.

The Economic Survey, released on Monday, noted that fiscal deficit is likely to drop to 4.5 per cent by 2026. The survey noted that India's fiscal deficit has dropped from 6.4 per cent in 2022-23 to 5.6 per cent in 2023-24, aided by strong growth in direct and indirect taxes on account of resilient economic activity. Increased tax compliance also helped India to collect more taxes than budgetary estimates.

Higher-than-budgeted non-tax revenue in the form of RBI dividends also boosted revenue receipts, it said.

“A decomposition of the fiscal deficit over the past few years reveals that with a narrowing revenue deficit, a larger share of the fiscal deficit is being accounted for by capital outlay. This suggests that the productivity of borrowed resources has improved,” the Survey said.

[The Business Standard]