India’s fiscal deficit narrows to 29.4 pc of FY25 target in April-Sep

NEW DELHI — India’s fiscal deficit for the April-September period stood at INR 4.75 lakh crore, or about 29.4 per cent of the estimate, for the current fiscal (FY25), government data showed on Wednesday. 

According to the data, net tax receipts for the first six months of the current financial year were INR 12.65 lakh crore, or 49 per cent of the annual target, compared with INR 11.6 lakh crore for the same period last year.

The gap between expenditure and revenue during the first six months of the current fiscal stood at INR 4.75 lakh crore of the total limit set at INR 16.85 lakh crore for the ongoing fiscal, according to provisional data released on Wednesday by the Controller General of Accounts (CGA).

The government had set a fiscal deficit target of 4.9 per cent of GDP for the financial year ending March 2025, as it aims to continue on its fiscal consolidation path.

According to Aditi Nayar, Chief Economist and Head at ICRA, the fiscal deficit declined to Rs 4.7 lakh crore or 29 per cent of the FY2025 BE in H1 FY2025, from INR 7 lakh crore in April-September FY2024, aided by the RBI’s dividend payment in the early part of the fiscal as well as the continuing YoY contraction in the capital expenditure.

“In H1 FY2025, the net tax revenues rose by 9 per cent YoY, non-tax revenues expanded by 51 per cent boosted by the RBI dividend, and revenue expenditure grew by a modest 4 per cent, while capex contracted by an unpleasant 15 per cent,” she noted.

Overall, capex rose by 10.3 per cent YoY in Q2 FY25, which should support economic growth in that quarter. ICRA believes that income tax collections may surpass the FY2025 RBE of INR 11.5 lakh crore, unless large refunds are released in the latter part of the fiscal, while corporation tax inflows may print in line or slightly lower than the target. The non-tax revenue reached INR 3.57 lakh crore by September, achieving 65.5 per cent of the Union Budget estimate of INR 5.45 lakh crore for the fiscal 2025.

The fiscal deficit was supported by the central bank’s dividend payment earlier in the year and a reduction in capital expenditure. The RBI paid INR 2.1 lakh crore as a dividend to the central government for the fiscal 2024. As per the data, capital expenditure in the April-September period reached INR 4.14 lakh crore, amounting to 37.3 per cent of the full-year target, down from 49 per cent achieved in the first half of the previous fiscal.