Fiscal deficit at 74.5% of full year target as of January 2025

4 Mar 2025 , 09:36 AM

FISCAL DEFICIT TOUCHES 74.5% IN JANUARY 2025

With another 2 months to go, the fiscal deficit surged from 56.7% of full year target at the end of December 2024 to 74.5% by end of January 2025. While the Union Budget 2025-26 had reduced the fiscal deficit target for FY25 by 10 bps to 4.8%, considering the pressure on GDP and the spike in spending, it looks like 4.8% to 4.9% could be the likely range. Fiscal deficit target for FY26 has been lowered to 4.4%; and the centre has laid out a roadmap to consistently reduce the fiscal deficit over next 6 years as per FRBM. The government has not given too much credence to calls for pump priming; which involves expanding fiscal deficit to boost growth. That was not needed, and government is right in being fiscally prudent.

FY25 FISCAL DEFICIT STORY TILL JANUARY 2025

The table below captures the government receipts, expenditures, and the fiscal deficit for FY25, for the 10 months up to January 2025. This month, the Controller General of Accounts (CGA) has also incorporated the lower rupee fiscal deficit for FY25 at ₹15.70 Trillion.

Item Heads	Budget Estimate FY25 (₹ in Crore)	Actuals up to Jan 2025 (₹ in Crore)	Actuals to Target (% achieved)	Same Period Last Year
Revenue Receipts	30,87,960	23,71,188	76.8%	82.2%
Tax Revenue (Net)	25,56,960	19,03,558	74.4%	80.9%
Non-Tax Revenue	5,31,000	4,67,630	88.1%	90.0%
Non-Debt Capital Receipts	59,000	29,224	49.5%	61.1%
Recovery of Loans	26,000	20,205	77.7%	83.3%
Other Receipts	33,000	9,019	27.3%	41.9%
Total Receipts	31,46,960	24,00,412	76.3%	81.7%
Revenue Expenditure	36,98,058	28,12,595	76.1%	74.4%
of which Interest	11,37,940	8,75,461	76.9%	77.9%
Capital Expenditure	10,18,429	7,57,359	74.4%	75.9%
Total Expenditure	47,16,487	35,69,954	75.7%	74.7%
Fiscal Deficit	15,69,527	11,69,542	74.5%	63.6%
Revenue Deficit	6,10,098	4,41,407	72.4%	49.4%
Primary Deficit	4,31,587	2,94,081	68.1%	41.3%

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 latest budget. Secondly, on the expenditure front, the revenue expenditure is slated to spike more, which is also reflected in the raising of the revenue deficit target for FY25. Thirdly, Fiscal deficit looks set to end the year in the range of 4.8%-4.9% with revenues and spending kept in check. For now, the impact of the global uncertainty is yet to be felt by the markets.

STORY OF GOVERNMENT REVENUES UPTO JANUARY 2025

Revenues in FY25 got an early boost from the bumper RBI dividend of ₹2.11 Trillion. However, revenues have been struggling in H2FY25, compared to last year.

• Against the reduced receipts target of ₹31.47 Trillion, central government has achieved ₹24.00 Trillion as of end January 2025. That is, 76.3% of full year revenue target for FY25; sow the revenue pressure is likely to last. Tax receipts have come under pressure amidst tapering growth and a spike in refunds; and that targets has also been cut.
• For FY25, the target for net tax revenues (net of refunds and devolvement) was cut marginally to ₹25.57 Trillion. About ₹19.04 Trillion has come in as tax revenues, or 74.4% of full year target. Even non-tax revenues (despite RBI dividend bonanza) has only reached 88.1% of full year target.
• On non-debt capital receipts, the government cut the target at ₹59,000 Crore for FY25. Among capital receipts; disinvestments and monetization of assets have fallen short.

The government is experiencing pressure on indirect taxes; although the direct tax flows have been relatively robust.

STORY OF GOVERNMENT SPENDING UPTO JANUARY 2025

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

• Total expenditure, comprising of revenue expenditure and capital expenditure, had been reduced to ₹47.16 Trillion for FY25. As of end December 2024, the total expenditure at ₹35.70 Trillion was 75.7% of full year target; at par with last year.
• Revenue expenditure has moved faster than last year. Till January 2025, actual revenue spending was ₹28.13 Trillion, against the full year target of ₹36.98 Trillion. That is 76.1% of full year target, compared to 74.4% last year.
• Capital spending has been cut sharply in FY25. From a modest target of ₹11.11 Trillion for FY25, the capex targets was further cut to ₹10.18 Trillion; of which actual capex stood at just ₹7.57 Trillion, or 74.4% of full year budget.

The capex growth for FY26 has been calculated on this reduced base, so effectively, the capex for FY25 has been almost flat compared to FY24. That is, one reason the capital goods index is at a multi-year low.

TALE OF 2 DEFICITS: FISCAL AND REVENUE DEFICIT

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

• Till the end of January 2025, fiscal deficit was 74.5% of full year deficit of ₹15.70 Trillion. While the fiscal deficit situation looks comfortable, the latest budget has revised fiscal deficit to 4.8% for FY25, which may mean that capex would be further compromised.
• Revenue deficit and primary deficit as a percent of full year targets have looked impressive at 72.4% and 68.1% respectively. However, both these deficits tend to get back-loaded. Revenue deficit as a percentage of fiscal deficit stood at 37.7%.

The moral of the story is that the government is not taking any chances on the fiscal prudence front, even if it means going slow on capex and revenue spending.