India Ratings Projects Fiscal Deficit At 4.75% In FY25, Below Budget Target

The government will be able to register the fiscal deficit at 4.75% in Fiscal 2025, 0.19% lower than the budget aim, by reigning in expenditure, domestic rating agency India Ratings and Research said on Wednesday.

The revenue expenditure, excluding subsidies, will be 0.12% of gross domestic product, lower than the budget estimate, the rating agency added.

Its chief economist and head of public finance Devendra Kumar Pant said the government capital expenditure will come out to be Rs 62,000 crore lower than the estimate of Rs 11.11 lakh crore.

Pant was quick to add that the government capex will still be 10.6% higher than the year-ago period. The government was initially envisaging a 17.6% growth in the key number.

Even as there is a dip in the government capital expenditure projected, the capex to GDP in Fiscal 2025 at 3.21% is estimated to be at a two-decade high, the agency said.

"The Fiscal 2025 capex growth has been impacted by the general elections in May 2024, and capex in first half of Fiscal 2025 shrank 15.42% year-on-year. To achieve the Fiscal 2025 (BE) target, capex in second half of Fiscal 2025 must grow 52.04% , which appears to be a daunting task," it added.

Among ministries, railways, and road, transport and highways will breach their Fiscal 2025 capex allocations, the agency said.

There will be a slippage of 0.10% of GDP on the subsidies front due to higher outgoes on food, fertiliser and petroleum subsidies, the agency said, pointing that the overall spending has been 54.55% higher than the budgeted levels in the first half of the fiscal.

On the revenue expenditure, excluding subsidies, the rating agency's report said actual spending by 43 ministries other than civil aviation, railways, and road, transport and highways in the April-September period was less than 40% of their allocation.

The Fiscal 2025 gross and net tax revenue will come at 12.02% of GDP and 8.08% of GDP, respectively, which will be a 17-year high, the report said, adding that income tax and corporate tax are estimated to contribute 80.94% and 10.53%, respectively, to the additional gross tax revenue.

Non-tax revenue and disinvestment receipts are to be lower than the budgeted amount of Rs 5.46 lakh crore and Rs 78,000 crore, respectively, in Fiscal 2025, it said.