Even as the government announced schemes to boost employment and assistance to some states in Union Budget 2024-25, it reiterated its intent to stick to the fiscal consolidation roadmap and announced a lower fiscal deficit target.
In what could be a signal to rating agencies, the government cut the fiscal deficit target to 4.9 per cent of the Gross Domestic Product (GDP) for financial year 2024-25 from 5.1 per cent in the interim Budget, while underlining that the central government debt will be on a declining path as a percentage of the GDP.
“The fiscal consolidation path announced by me in 2021 has served our economy very well, and we aim to reach a deficit below 4.5 per cent next year. The Government is committed to staying the course. From 2026-27 onwards, our endeavour will be to keep the fiscal deficit each year such that the Central Government debt will be on a declining path as percentage of GDP,” Finance Minister Nirmala Sitharaman said while presenting the Budget.
The government had pegged the fiscal deficit target at 5.9 per cent of the GDP in Budget 2023-24, which it was able to lower to 5.8 per cent in the revised estimates. The Budget 2024-25 documents presented on Tuesday showed that as per the ‘provisional actuals’ data, fiscal deficit for FY24 stands at 5.6 per cent of the GDP.
The lowering of the fiscal deficit in FY24 has come on the back of a sharp compression of revenue expenditure and lower capital expenditure or capex. Revenue expenditure fell by 1.3 per cent from the revised estimates for FY24 to Rs 34.94 lakh crore in the provisional actuals. Capex also reduced in FY24 to Rs 9.49 lakh crore, 0.2 per cent lower than the revised estimates and 5.2 per cent or Rs 52,455 crore lower than budget estimate for FY24.
The government finances have also gained on the back of a sharp rise in tax and non-tax revenues. Tax revenues have grown nearly 11 per cent year-on-year to Rs 23.27 lakh crore in FY24. Non-tax revenues also rose 40.8 per cent from previous fiscal to 4.02 lakh crore in FY24. For FY25, tax revenues have been estimated to rise 11 per cent to Rs 25.83 lakh crore, while non-tax revenues are seen rising 35.8 per cent to Rs 5.46 lakh crore.
For FY25, the government stuck to the capital expenditure target of Rs 11.11 lakh crore set out in the interim budget, marking an increase of a slower rate of growth compared to previous years of 17 per cent over the provisional actual number of Rs 9.49 lakh crore in FY24. “We will endeavour to maintain strong fiscal support for infrastructure over the next 5 years, in conjunction with imperatives of other priorities and fiscal consolidation. This year, I have provided Rs 11,11,111 crore for capital expenditure. This would be 3.4 per cent of our GDP,” Sitharaman said.
The government has also cut the gross borrowing target in 2024-25 to Rs 14.01 lakh crore from Rs 14.13 lakh crore announced at the time of the interim budget in February. In the previous financial year, the government had borrowed 15.43 lakh crore.
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