The Centre’s fiscal deficit came in at 85.8% of the annual target in April- February of the current financial year even as capital expenditure grew less than 1%, indicating that the fiscal deficit print may be lower than the target of 5.8% for the full year. The fiscal deficit was 86.5% of the annual target in April- February of FY25.
The fiscal deficit stood at Rs 13.5 lakh crore in the eleven months of FY25, 10% lower than the Rs 15 lakh crore recorded in the corresponding period a year ago. The net tax revenues rose by 9% on year, non-tax revenues expanded by 37%, boosted by the RBI dividend, and revenue expenditure grew by 4.7%, while capex rose by a meagre 0.8% during April- February of FY25.
Gross tax collections increased by 11% on year in April-February FY25, aided by the 22% expansion in income tax collections even as corporate tax collections rose by just 2% during this period. While income tax collections need to rise by 6% in March 2025 to meet the FY25 RE, corporate tax collections are required to grow by a steep 34.4% in the month on year.
Net tax revenues rose by 9% in the 11 months of FY25, slightly lower than the FY25 RE growth of 9.9%. This implies a required growth of 13% in March 2025 to meet the FY25 RE, which analysts feel is achievable given the modest uptick in tax devolution in the month. After rising by a healthy 51% on year in January 2025, the Centre’s capex.
Overall, the lower capex impulse by the government so far in FY25 has been one of the reasons behind economic growth slowing to an estimated four-year low of 6.5%.
“To achieve the FY25RE target of Rs 10.2 lakh crore, capex in March 2025 must be Rs 2.1 lakh crore, which has not been achieved since the monthly capex data is available,” said Senior Analyst at India Ratings. This would provide cushion to the government in meeting its FY25 fiscal deficit target despite a trailing growth in gross tax revenues, he said.
Overall, ICRA expects the fiscal deficit to print largely in line with the absolute FY25 RE of Rs 15.7 lakh crore. Interestingly, the NSO has pegged the nominal GDP at Rs 331 lakh crore as per its Second Advance Estimate for FY25, which is 2.1% higher than the first advance estimate of Rs 324.1 lakh crore that was used in the Union Budget.
“This implies that the fiscal deficit will be contained at 4.7% of GDP in FY25, lower than the RE of 4.8% for the fiscal,” ICRA chief economist said.
Source from: https://www.financialexpress.com/policy/economy-centres-fiscal-deficit-at-85-8-of-re-in-april-february-3791957/a
