Fiscal deficit at 85.8% of full year target as of February 2025

1 Apr 2025 , 12:23 PM

FISCAL DEFICIT TOUCHES 85.8% IN FEBRUARY 2025

In just the last 2 months (between December 2024 and February 2025), the fiscal deficit surged from 56.7% of full year target to 85.8%. Union Budget 2025-26 had cut the fiscal deficit target for FY25 by 10 bps to 4.8%. However, with 85.8% of target done and one month to go, it looks like some spillage into the range of 4.8% to 4.9%, looks on the cards.

In the last few years, the central government has consistently done better than the fiscal deficit target. However, 4.8% for FY25 could be a struggle and 4.4% for FY26 could be that much tougher. Also, fiscal prudence is not negotiable. However, slowing tax revenues, tepid capital markets and back-ended capex spending is putting pressure on fiscal deficit in FY25.

FY25 FISCAL DEFICIT STORY TILL FEBRUARY 2025

The table below captures government receipts, expenditures, and fiscal deficit for FY25, for the 11 months up to February 2025. This is based on the lower rupee fiscal deficit for FY25 at ₹15.70 Trillion; as outlined in Union Budget 2025-26.

Item Heads	Budget Estimate FY25 (₹ in Crore)	Actuals up to Feb 2025 (₹ in Crore)	Actuals to Target (% achieved)	Same Period Last Year
Revenue Receipts	30,87,960	25,08,953	81.2%	81.9%
Tax Revenue (Net)	25,56,960	20,15,634	78.8%	79.6%
Non-Tax Revenue	5,31,000	4,93,319	92.9%	95.9%
Non-Debt Capital Receipts	59,000	37,364	63.3%	64.5%
Recovery of Loans	26,000	21,655	83.3%	90.3%
Other Receipts	33,000	15,709	47.6%	42.2%
Total Receipts	31,46,960	25,46,317	80.9%	81.5%
Revenue Expenditure	36,98,058	30,81,282	83.3%	83.1%
of which Interest	11,37,940	9,52,844	83.7%	83.5%
Capital Expenditure	10,18,429	8,11,887	79.7%	84.8%
Total Expenditure	47,16,487	38,93,169	82.5%	83.4%
Fiscal Deficit	15,69,527	13,46,852	85.8%	86.5%
Revenue Deficit	6,10,098	5,72,329	93.8%	87.1%
Primary Deficit	4,31,587	3,94,008	91.3%	91.3%

Data Source: Controller General of Accounts (CGA)

A few quick readings for FY25 up to January 2025. Firstly, the year has seen the government faltering on revenues; and most revenue targets have been cut in the recent budget. Secondly, on the expenditure front, the government may have gone slow on revenue spending but capex is being prioritized to boost growth. Thirdly, Fiscal deficit looks set to end the year in the range of 4.8%-4.9% with a late revenue boost and some back-ending of spends. For now, the impact of the global uncertainty is yet to be felt by the markets.

STORY OF GOVERNMENT REVENUES UPTO FEBRUARY 2025

While the year started strong with the ₹2.11 Trillion RBI dividend and strong tax revenues, the revenue flows have struggled in H2FY25.

• Against the reduced receipts target of ₹31.47 Trillion, central government has achieved ₹25.46 Trillion as of end February 2025. That is, 80.9% of full year revenue target for FY25; so, the revenue pressure is likely to last. Tax receipts are under pressure amidst tapering growth and spike in refunds.
• For FY25, the target for net tax revenues (net of refunds and devolvement) was cut marginally to ₹25.57 Trillion. About ₹20.16 Trillion has come in till Feb-25, or 78.8% of full year target. Even with a year-end boost, revenues may eventually fall short.
• On non-debt capital receipts, government cut the target to ₹59,000 Crore for FY25. Among capital receipts; disinvestments and monetization of assets fell short.

The government is experiencing pressure on indirect taxes; although direct tax flows have been relatively robust. STT has taken a hit in last quarter.

STORY OF GOVERNMENT SPENDING UPTO FEBRUARY 2025

Here is a quick dekko at the updated numbers for FY25.

• Total expenditure, comprising of revenue and capital expenditure, had been reduced to ₹47.16 Trillion for FY25. As of February 2025, total expenditure at ₹38.93 Trillion was 82.5% of full year target; at par with last year.
• What about revenue expenditure ? Till February 2025, actual revenue spending was ₹30.81 Trillion, against the full year target of ₹36.98 Trillion. That is 83.3% of full year target, once again at par with previous year.
• Capital spending has been cut sharply in FY25; from a modest ₹11.11 Trillion to ₹10.18 Trillion, in Union Budget 2025-26. As of end February 2025, actual capex stood at just ₹8.12 Trillion, or 79.7% of full year budget.

Capex growth for FY26 has been calculated on this reduced base, so effectively, capex for FY25 has been flat compared to FY24. That is not great news for the infrastructure sector.

TALE OF 2 DEFICITS: FISCAL AND REVENUE DEFICIT

In India,  not only total receipts fall short of total expenditure; but even revenue receipts fall short of revenue spending. Hence, India runs a fiscal deficit and a revenue deficit. Here is a quick look at the 2 deficits for FY25.

• Till the end of February 2025, fiscal deficit was 85.8% of full year deficit of ₹15.70 Trillion. While fiscal deficit situation looks comfortable, the latest budget revised fiscal deficit to 4.8% for FY25. It remains to be seen who wins; capex or fiscal prudence?
• Revenue deficit and primary deficit as a percent of full year targets have been at 93.8% and 91.3% respectively. Both these deficits got back-loaded in February. Revenue deficit as a percentage of fiscal deficit stood at 42.5%.

The moral of the story is that FY25 is seeing pressure on government revenues, even as there are expectations on capex commitments. That is surely a tightrope walk!