Government Faces Uphill Task in Meeting Fiscal Year Capex Target

India's fiscal deficit stands at 46.5% of the budget estimates by October FY25, posing challenges for the government. With only five months left, meeting the full-year capex budget remains daunting as capital expenditure fell by 14.7% in April-October but showed improvement in October.

The central government's fiscal deficit has reached 46.5% of its budget estimates in the first seven months of the 2025 financial year, according to a Union Bank of India report. The report reveals that capital expenditure during this period was only 42%, suggesting challenges ahead in managing the remaining 58% within five months.

Union Bank of India's report underscores the daunting task the government faces. Achieving the Rs 11.11 lakh crore budgeted capex target appears problematic, with limited time left. Capital expenditure, vital for long-term economic gains, declined by 14.7% from April to October FY25, though October showed a positive shift compared to prior declines.

The report indicates that for April-October FY25, India's fiscal deficit is Rs 7.51 lakh crore, constituting 46.5% of the Budget Estimate. This is compared to Rs 8.04 lakh crore, or 45.0% of BE, seen in the corresponding period last year. Fiscal trends, which lagged until September 2024, improved notably by October 2024, indicating strengthening fiscal dynamics as GDP growth hit a seven-quarter low of 5.4% in Q2 FY25.

Expenditure dynamics have shown a turnaround; while overall spending saw a year-on-year decline during the first half of FY25, it surged in October, with revenue expenditure increasing by 41.9%. However, spending quality remains a concern as the focus continues more on revenue than capital expenditure. The government faces the challenge of meeting fiscal goals without sacrificing spending quality as the fiscal year progresses. (ANI)

(With inputs from agencies.)