India’s FY25 fiscal deficit hits ₹15.77 trillion, exceeds target

New Delhi: India's fiscal deficit for 2024-25 (FY25) stood at  ₹15.77 trillion, slightly higher than the ₹15.70 trillion estimated for the year, according to the provisional data released by the Controller General of Accounts (CGA) on Friday.

The increase follows higher revenue expenditure and capital expenditure during the ongoing fiscal year.

The latest figure is lower than the  ₹16.54 trillion registered in FY24, which was 95.3% of the estimates for the year. 

To be sure, the central government's fiscal deficit target was 4.8% of the gross domestic product (GDP) for 2024-25, with a further reduction to 4.4% targeted for 2025-26.

A fiscal deficit is the shortfall between government spending and revenue, excluding borrowings. It shows how much the government must borrow to meet its expenses.

While some deficits can spur growth, a high one risks inflation and debt, making careful fiscal management essential.

Also Read: Centre to hold FY26 fiscal deficit at 4.4% despite global 

Receipts and expenditure

During FY25, net tax receipts stood at  ₹24.99 trillion, or 97.7% of the target set in the annual budget, against  ₹23.27 trillion in the same period of the previous year, the CGA data showed.

Non-tax revenue stood at  ₹5.38 trillion or 101.2% of the annual budget estimates, taking the total revenue receipt to  ₹30.78 trillion, or 97.8% of the estimates for 2024-25.

Non-tax revenue stood at  ₹4.02 trillion, and total revenue receipts stood at  ₹27.89 trillion during the previous fiscal year (FY24).

Total central government expenditure during the FY25 period was  ₹46.56 trillion, or 98.7% of the annual target, against  ₹44.43 trillion in the year-ago period.

Capital expenditure rose to ₹10.52 trillion in FY25, exceeding the annual target by 3.3%, up from ₹9.49 trillion a year earlier, as spending accelerated in the final two quarters after a slow start due to the general election.

During FY25, revenue expenditure stood at  ₹36.04 trillion, or 97.4% of the annual target for 2024-25, up from  ₹34.94 trillion in the year-ago period.

Unprecedented dividend payout

The government's tighter fiscal deficit target of 4.8% of GDP, set in the February budget, is supported by a record dividend from the Reserve Bank of India (RBI) for 2023-24, accounted for in 2024-25.

The  ₹2.11 trillion disbursement marks a 141% increase over the previous year’s dividend and provides a crucial buffer for 2024-25, offsetting potential shortfalls in tax revenue or hikes in public spending.

This substantial payout aids the government’s adherence to its fiscal consolidation path, to lower the deficit to 4.4% by 2025-26.

The RBI is expected to transfer a record ₹2.69 trillion dividend to the Centre for 2024-25 (which is to be accounted for in 2025-26).

Also Read: RBI dividend: Fiscal boost for government from record ₹2.69-trillion payout for FY25 

Expert take

India’s FY25 fiscal deficit marginally exceeded the revised estimate by ₹77 billion, driven by higher capital expenditure and offset by ₹0.9 trillion in revenue savings, said Aditi Nayar, chief economist, Icra, adding that a 2% upward revision in nominal GDP helped contain the deficit at 4.8% of GDP, in line with the target.

"The upward revision in the FY2025 nominal GDP number also augurs well for meeting the deficit and debt-to-GDP targets for FY2026. Despite a relatively lower projected nominal GDP growth of about 9% in FY2026 (Icra’s expectations) vis-à-vis the budgeted levels of 10.1%, the fiscal deficit-to-GDP ratio can be contained at 4.4% in FY2026, while also accommodating a marginal fiscal slippage (to the tune of about ₹300-350 billion), given the larger base," she said.

"This, along with the additional cushion on the receipts side on account of the higher-than-budgeted RBI dividend transfer, provides comfort on the fiscal front amidst heightened global uncertainties," she added.

Also Read: Ajit Ranade: RBI’s increasing fiscal support deserves a closer look