New Delhi [India]: The central government is on course to achieve its fiscal deficit target of 4.8 per cent of GDP for the financial year 2024-25 (FY25), according to a report by Bank of Baroda. The report credits this to a higher-than-expected nominal GDP growth rate, steady revenue receipts, and controlled expenditure growth.
The report stated,
“We believe that government remains on track to meet its fiscal deficit target of 4.8 per cent for FY25.”
It outlined three major reasons supporting this optimistic outlook:
- Higher Nominal GDP Growth:
The nominal GDP growth rate is expected to be 9.9 per cent, slightly above the 9.7 per cent projected in the Union Budget. A higher GDP growth rate enhances revenue collections, making it easier to manage fiscal deficit targets. - Controlled Government Spending:
Government spending started slowly in the first half of the fiscal year due to the general elections but picked up significantly in the latter half (H2). The latest data indicates that expenditure has remained on track with no significant deviations. - Steady Revenue Receipts:
Consistent momentum in revenue receipts has been a key factor in controlling the fiscal deficit. Despite a slowdown in corporate tax collections, indirect tax revenues—particularly customs duties and Central Goods and Services Tax (CGST)—have shown improvement. Additionally, income tax collections have remained stable, providing robust support to overall revenue growth.
As of January 2025, the central government has utilized 75.7 per cent of its revised expenditure estimate, compared to 74.7 per cent during the same period last year.
Several key ministries, including Railways, Consumer Affairs, Rural Development, Defence, Home Affairs, Education, and Health, have reported higher spending compared to the previous year, as a percentage of their revised estimates.
However, as ministries approach their revised spending limits, the pace of expenditure is expected to moderate in the coming months.
Ajay Bagga, a banking and market expert, noted:
“The improved GDP growth rate and disciplined government spending are positive signs for fiscal management. The challenge remains in maintaining revenue momentum, particularly in corporate tax collections.”
Given these trends, Bank of Baroda expects the government to successfully meet its fiscal deficit target of 4.8 per cent for FY25. The report suggests that with continued revenue collection and disciplined spending, fiscal discipline will be maintained throughout the remainder of the financial year.