India's Fiscal Deficit: On a Path to Improvement?

The fiscal deficit of India stood at 29.4% of the full-year target at the end of the first half of FY25, amounting to Rs 4,74,520 crore. This shows improvement from the previous year's 39.3%. The government targets a deficit reduction to 4.9% of GDP in FY25.

India's fiscal deficit has reached 29.4% of the full-year target by the end of the first half of the financial year FY25, as per government data released on Wednesday. In absolute numbers, the deficit amounted to Rs 4,74,520 crore by the end of September, according to the Controller General of Accounts (CGA).

The corresponding period for the previous financial year 2023-24 reflected a deficit standing at 39.3% of the Budget Estimates (BE). The current Union Budget aims to reduce the fiscal deficit to 4.9% of the GDP, a decrease from 5.6% in 2023-24, with a goal to cap it at Rs 16,13,312 crore for the fiscal year 2024-25.

Aditi Nayar, Chief Economist at ICRA, credits the decline from the previously higher deficit figures to Rs 4.7 lakh crore in H1 FY25. This change has been helped by the Reserve Bank's early dividend payment and a contraction in capital expenditure over the year. Fiscal deficit represents the gap between government expenditure and revenue, indicating the borrowings needed by the government.

(With inputs from agencies.)