Centre’s fiscal deficit in FY25 may be a tad lower than the budgeted 4.9% of GDP

Amid tough economic conditions, the Center is likely to take some comfort in its fiscal management as its fiscal deficit will be slightly better than the 4.9% of GDP projected for the current fiscal year 2024-25.This is also likely to help To maintain the center in 2025-26. fiscal deficit target at an ambitious 4.3%.

According to sources, tax collections, especially on goods and services tax, have been doing well in the current fiscal, while direct tax collections have also been strong, despite a slight slowdown in corporate tax clearance, at least income tax collections are expected to exceed the budget target. 11.87 lakh crore for the budget.

Meanwhile, the Exchequer is also likely to see some savings on the expenditure side, as capital expenditure will remain underwhelming this fiscal due to the general election and the presentation of the Union Budget in July.

For FY26, the Center is likely to maintain the fiscal consolidation pedal, which also sends a positive signal to both domestic and foreign investors about the stability of the economy. , said a source close to the development.

Accordingly, the fiscal deficit target is likely to be in the range of 4.3% or above, with a final decision to be taken closer to the presentation of the Union Budget in February.

According to official data, the Centre’s fiscal deficit stood at 46.5% of the full-year estimate of Rs 16.13 lakh crore in the April-October period 2024. Net tax revenue was 50.5% of the budget estimate, while capital expenditure was Rs 42% of the budgeted 11.1 lakh crore for the current financial year.More updated data for 2024 for the April-November period will be published on December 31.

However, analysts and experts also believe that there will be some improvement in FY25 financial results.

“Gross tax collections grew by a healthy 10.8% in April-October 2024, helped by a 20% expansion in income tax collections. ICRA believes that income tax collections may exceed the FY2025 RBE of Rs.11.5 lakh crore, unless there are large offsets in the last part of fiscal spending, even if corporate tax inflows may print in line with or slightly above the target. low,” said Aditi Nayar, ICRA’s chief economist and head of research and exports, in a recent post.

In terms of expenditure, ICRA expects the government’s capitalization target to be Rs.11 trillion for FY2025, with a gap of at least Rs.1 lakh crore to cover any shortfall in disinvestment and taxes the modest net outflow of cash under demand is likely to be offset by spending on other departments and ministries at the expense of savings and is unlikely to pose a threat to the fiscal deficit. “Therefore, we expect the fiscal deficit to follow modestly the RBE of 16.1 trillion or 4.9% of GDP,” he said.

CareEdge Ratings said it expects the fiscal deficit to come in at 4.8% of GDP on 25, slightly below the budget target of 4.9% on lower nominal GDP growth. expectations (compared to BE). “With lower-than-budgeted capital expenditures and slightly higher revenue expenditures, we anticipate that the Center fiscal deficit to be Rs 15.6 lakh crore in FY25,” it said in a recent note.