Fiscal Deficit and Budgetary Spending Analysis
The Indian central government's fiscal deficit reached 74.5% of the revised annual target up to January this financial year, up from 63.6% at the same time the previous year. This increase is attributed to a significant rise in capital expenditure and a double tranche of devolution to states in January.
- The fiscal deficit is expected to remain within the target of 4.8% of GDP for FY25.
- The net tax revenue of the central government was impacted due to the early resource transfer to states, which will proportionally reduce devolution in the last two months of the year.
- As of January, 83.5% of the FY25 devolution to states has been accomplished, the highest since FY01.
Fiscal Deficit in Figures
In absolute terms, the fiscal deficit stood at ₹11.70 lakh crore until January this fiscal, compared with ₹11.03 lakh crore a year earlier. In January alone, the deficit more than doubled to ₹2.55 lakh crore from ₹1.20 lakh crore the previous year.
Expenditure Patterns
- Revenue Spending: Increased by 5.1% year-on-year in January to ₹2.66 lakh crore.
- Capital Expenditure: Rose 51% to ₹72,022 crore, marking a third consecutive month of growth following an election-induced slowdown earlier in the fiscal year.
- Between April and January, revenue spending increased by 6.8% year-on-year, surpassing the full-year target of a 5.8% increase. Capital expenditure grew by 5% to ₹7.57 lakh crore, against an annual target of 7.3%.
- Overall spending grew by 6.4% until January, compared to the FY25 target of 6.1%.
