Government committed to reducing fiscal deficit to 4.9% by FY25: FM Sitharaman

Finance Minister Nirmala Sitharaman: Staying the course on fiscal roadmap

The government remains steadfast in its target of reducing the fiscal deficit to 4.9 percent of GDP in FY25 on the back of robust revenue generation and stronger economic activity, Finance Minister Nirmala Sitharaman said.

“Key areas of government focus that continue to lay the groundwork for a Viksit Bharat include restrained revenue expenditure,” the finance minister said in her inaugural address at the Kautilya Economic Conclave 2024 3rd edition on October 4.

She emphasised that reducing the fiscal deficit from 5.6 percent of GDP in FY24 to 4.9 percent in FY25 will "not only keep the bond yields in check but also manage borrowing costs". This commitment is expected to lower the borrowing costs across the economy. A significant aspect of the government’s fiscal strategy is improving the quality of expenditure, she added.

Capital expenditure is budgeted to increase by 17.1 percent to Rs 11.1 lakh crore in FY25, amounting to 3.4 percent of GDP.

With commodity prices declining, subsidies for fuel and fertilisers have been reduced, contributing to restrained growth in revenue expenditure. The minister highlighted that a larger proportion of the fiscal deficit is now being allocated towards capital outlays, signalling a shift towards more investment-oriented deficit financing.

This move will have long-term benefits for the economy, but India also finds itself amid a global geopolitical re-positioning. “This re-positioning can act as a structural force to India’s advantage by creating robust supply chains with countries with strategic congruence. India benefits from the new international order, which is reshaping better to reflect the power distribution in today’s world,” she said.

To ensure policy continuity, the government has sustained reforms across ease of doing business, infrastructure, banking, investment and trade policy, she said. “11.7 km of national highway is laid per day. Port turnaround time has dropped by 50 percent from 2014 to 2024. 0.9 days is the port turnaround time, lower than the US, Australia, and Singapore," she said.

​​Poor women, youths and farmers will be the stakeholders in Amrit Kaal, Sitharaman added.