India's fiscal deficit for FY24 likely to be better than expected

Govt capex for the last financial year also in line with projections, say sources

The Centre’s fiscal deficit for 2023-24 (FY24) is expected to be slightly better than the projected Rs 17.34 trillion in absolute terms, sources informed. The government had narrowed its fiscal deficit target for FY24 to 5.8 per cent of gross domestic product (GDP) in the Revised Estimates (RE).

The RE was lower than the budgeted fiscal deficit estimate of 5.9 per cent of GDP. India’s fiscal deficit between April and February in FY24 reached Rs 15.01 trillion, or 86.5 per cent of the full-year revised target of Rs 17.34 trillion, according to the Controller General of Accounts data.
 

“Some extra tax receipts and some non-tax revenues, including some unanticipated revenue, have helped improve the fiscal deficit target,” the source said.
 

The government, under its fiscal glidepath, aims to bring down the fiscal deficit to 4.5 per cent by 2025-26. The 2024-25 (FY25) fiscal deficit target has been set at 5.1 per cent of GDP. The fiscal deficit data for FY24 will be released by the government on May 31.
 

The government’s capital expenditure (capex) for the last financial year, sources said, is also on track with the projections. “It would not be lower than what was mentioned in the RE,” sources said.
 

For the April-February period of FY24, the government had spent 85 per cent of the revised capex estimate of Rs 9.5 trillion. The thrust on infrastructure and capex is expected to continue in the Union Budget for FY25.
 

“We are on track to spend as anticipated in the vote-on-account Budget,” the source said.
 

In her Interim Budget, Finance Minister Nirmala Sitharaman raised the Centre’s capex target by 16.9 per cent for FY25 to Rs 11.1 trillion over RE for FY24. Sources said that there have been no cuts in spending in the first quarter of FY25 so far on account of the ongoing elections.
 

The government may consider going for another round of buying back government securities if needed, sources said. On May 3, the Reserve Bank of India announced that the central government would buy back Rs 40,000 crore worth of government securities on May 9, 2024.
 

“The announced bond buyback will result in better interest savings. The government is not letting cash lie idle. We are maintaining the optimum level of cash reserves,” the source said.

Fiscal track

 The government had narrowed its fiscal deficit target for FY24 to 5.8% of GDP
 

 The RE was lower than the budgeted fiscal deficit estimate of 5.9% of GDP
 

 Fiscal deficit for FY24, between April and Feb, reached Rs 15.01 trn, or 86.5% of the full-year RE of Rs 17.34 trn
 

 Government under its fiscal glide path wants to bring down the deficit to 4.5% by FY26, the FY25 fiscal deficit target has been set at 5.1% of GDP