Union Minister of Finance and Corporate Affairs, Nirmala Sitharaman, has revised the fiscal deficit target for 2024-25 to 4.9% of Gross Domestic Product (GDP), a reduction from the 5.1% projected in the interim budget. The fiscal deficit, which represents the shortfall between government expenditures and revenues, will see total receipts for FY25 estimated at approximately $383.34 billion (Rs. 32.07 trillion). In contrast, total expenditures are projected to reach around $576.26 billion (Rs. 48.21 trillion). To finance this deficit, the government plans gross market borrowings of $167.46 billion (Rs. 14.01 trillion), with net market borrowings estimated at $139.02 billion (Rs. 11.63 trillion). Net tax receipts for the fiscal year are anticipated to be $308.75 billion (Rs. 25.83 trillion).
During her budget presentation, Sitharaman reaffirmed the government’s target of reducing the fiscal deficit to 4.5% by 2025-26. Although there were initial concerns that the deficit might remain at 5.1%, the Economic Survey predicts a decrease to 4.5% by 2026. The survey notes a reduction in the fiscal deficit from 6.4% in 2022-23 to 5.6% in 2023-24, attributed to significant growth in both direct and indirect taxes, as well as improved tax compliance. Additionally, increased non-tax revenue from RBI dividends has bolstered revenue receipts. The survey also highlights that a notable portion of the fiscal deficit now arises from capital outlays, suggesting more effective use of borrowed funds.
