India’s Fiscal Deficit Hits 29.4% Of FY25 Target Amid Moderate Revenue Growth

India’s fiscal deficit reached Rs 4.75 lakh crore, or 29.4% of the FY25 target, in the April-September period, according to data released Wednesday by the Controller General of Accounts (CGA). Net tax receipts for the first half of the fiscal year totaled Rs 12.65 lakh crore, covering 49% of the annual target and marking a 9% year-on-year increase.

The government aims to limit the fiscal deficit to 4.9% of GDP for the full year, with a total target of Rs 16.85 lakh crore, as it continues its fiscal consolidation efforts. This year’s deficit is notably lower than last year’s Rs 7 lakh crore deficit for the same period, partly due to a substantial dividend from the Reserve Bank of India (RBI) and reduced capital expenditure.

Dividend Boost and Capex Reduction Aid Fiscal Balance

ICRA Chief Economist Aditi Nayar highlighted that the fiscal balance benefited from the RBI’s Rs 2.1 lakh crore dividend payment and a 15% contraction in capital expenditure. She noted that revenue expenditure grew modestly by 4%, while non-tax revenues surged by 51%, bolstered by the RBI dividend.

Despite a 15% YoY decline in H1 FY25 capex, capital expenditure in Q2 FY25 showed a 10.3% growth, which may support economic growth in the quarter.

Income Tax Collections Expected to Surpass Estimates

As of September, non-tax revenue reached Rs 3.57 lakh crore, meeting 65.5% of the Union Budget estimate of Rs 5.45 lakh crore for FY25. Income tax collections may exceed the budgeted Rs 11.5 lakh crore, barring significant refunds later in the year. Capital expenditure reached Rs 4.14 lakh crore, covering 37.3% of the full-year target, a reduction from last year’s 49% for the same period.

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