Government finances indicate improvement, interest payments decline

The RBI stated in a latest update that the total expenditure of the union government registered a growth of 4.8 per cent in 2024-25 (PA) over 2023-24. As per cent of GDP, while revenue expenditure declined in 2024-25 (PA) vis-vis RE, capital expenditure remained broadly unchanged. The growth in interest payments moderated, while that of subsidy outgo saw a contraction during 2024-25 (PA) in line with RE.

Furthermore, the ratio of revenue expenditure to capital outlay (RECO) declined to 4.2, lower than RE (from 4.4 in 2023-24), which bodes well for the quality of public expenditure. Central government finances for April 2025 indicated an improvement in GFD and RD both in absolute terms and as per cent of BE vis-vis the corresponding period of the previous year, aided by substantial growth in non-tax revenue, and non-debt capital receipts (including disinvestment receipts). While revenue expenditure recorded a contraction due to a decline in interest payments, capital outlay grew by 20.9 per cent. Consolidated state government finances for 2024-25 witnessed some deterioration.

 

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