Fiscal deficit narrowed to 17.2 percent of the full year estimate in the first four months of the year, compared with 33.9 percent during similar period in the previous year, as spending remained contained due to elections, government data released on August 30 showed.
"GoI's fiscal deficit more than halved in April-July FY25... led by a contraction in capital expenditure during the election months, as well as the substantial dividend received from the RBI," said Aditi Nayar, chief economist, Icra.
The fiscal deficit was Rs 1.61 lakh crore for the first four months of the year. RBI had transfered a more than expected surplus dividend of Rs 2.11 lakh crore this year.
Capex utilisation remained lower at 16.3 percent of Budget estimates between April-July 2024, compared with 23.5 percent during a similar period in the previous fiscal. However, economists note that if the current trend of capex growth were to continue, it would move back into positive territory by September.
"Capex jumped 107.8 percent in July 2024 but this growth was not sufficient to bring capex growth in positive territory during April-July 2024. If this trend continues, by end-September 2024 capex growth will move in positive territory," said Paras Jasrai, senior analyst, India Ratings and Research.
The government has set a target of spending Rs 11.1 lakh crore on capex in FY25, and has only utilised Rs 2.6 lakh crore till now.
Revenues were on a better footing, with the government meeting 27.7 percent of the target in the first four months.
Non debt capital receipts seem to be far off the target having achieved only 8 percent of total budget of Rs 78,000 crore till July compared with 16 percent in the previous year.
"The outlook for revenue receipts seems fairly favourable, while there may be a miss on capex and disinvestment targets. Nevertheless, expenditure savings typically accumulated by ministries every year are likely to provide additional cushion to offset shortfall from other heads, if needed. Accordingly, ICRA expects the fiscal deficit to print in line or trail the FY25 estimate of Rs. 16.1 lakh crore or 4.9 percent of GDP," Nayar noted.
Global Ratings agency Fitch Ratings, on August 29, retained India’s BBB- rating with a stable outlook on the back of improving performance on fiscal consolidation and stronger growth outlook.
Fitch was confident of government meeting its revised fiscal deficit target of 4.9 percent in FY25.
The government, in its first Budget presented on July 23, had lowered the fiscal deficit to 4.9 percent of GDP compared with 5.1 percent in the interim Budget.
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