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India's fiscal deficit between April-May 2024 stood at around 3% of the overall target for FY25, at Rs 50,615 crore, down from 11.8% of the budget estimate in the corresponding period last year, according to the data released by the Controller General of Accounts. The revenue receipts, however, exceeded the expenditure, resulting in a surplus of Rs 90,923 crore. The overall fiscal deficit stood at Rs 16.54 lakh crore in FY24, against the budgetary target of Rs 17.86 lakh crore. The Union government contained the fiscal deficit at 5.6 per cent of the gross domestic product (GDP) in 2023-24 (FY24), compared with the Revised Estimates of 5.8 per cent. The Centre has set an FY25 fiscal deficit target of 5.1%, or Rs 16.85 trillion, in order to achieve a fiscal deficit of 4.5% of GDP by FY26. The focus will now shift to the upcoming Union Budget to see how the government sets up its long term agenda in terms of the revenue and expenditure profile.
Government of India receives Rs 572845 crore upto May 2024
The Government of India has received Rs 5,72,845 crore (18.6% of corresponding BE 2024-25 of Total Receipts) upto May 2024 comprising Rs 3,19,036 crore Tax Revenue (Net to Centre), Rs 2,51,722 crore of Non-Tax Revenue and Rs 2,087 crore of Non-Debt Capital Receipts, on account of Recovery of Loans. Rs 1,39,751 crore has been transferred to State Governments as Devolution of Share of Taxes by Government of India upto this period which is Rs 21,471 crore higher than the previous year.
Total Expenditure incurred by Government of India is Rs 6,23,460 crore (13.1% of corresponding BE 2024-25), out of which Rs 4,79,835 crore is on Revenue Account and Rs 1,43,625 crore is on Capital Account. Out of the Total Revenue Expenditure, Rs 1,23,810 crore is on account of Interest Payments and Rs 54,688 crore is on account of Major Subsidies.
Review of Ways and Means Advances Scheme for State Governments/UTs
The limits for financial accommodation extended by the Reserve Bank of India to State Governments / Union Territories (UTs) through Special Drawing Facility (SDF), Ways and Means Advances (WMA), and Overdraft (OD) schemes were last reviewed and announced on April 01, 2022. Based on the recommendations made by the Group constituted by the Reserve Bank and consisting of select state Finance Secretaries and taking into account the expenditure data of the states for the recent years, it has been decided to revise the WMA limits of the State Governments/ UTs, effective from July 01, 2024. The revised aggregate WMA limit for State Governments/ UTs will be Rs 60,118 crore as against the existing limit of Rs 47,010 crore. Revised State/ UT wise WMA limits are given in Annex.
Outlook:
According to RBI, Fiscal consolidation, buoyant tax collections and improvement in the quality of spending have been the distinguishing features of the Union Government’s fiscal position. As per the provisional accounts (PA), the gross fiscal deficit (GFD) was 5.6 per cent of GDP in 2023-24 as against the budget estimates (BE) of 5.9 per cent. Gross tax collections posted double digit growth, driven up by direct tax collections. On the expenditure side, the strategy remained geared towards growth-inducing capital expenditure; growth in revenue expenditure remained muted at 1.2%.
All major deficit indicators of the Union Government are projected to show further improvement. The GFD is pegged at 5.1 per cent of GDP in 2024-25 (BE), 46 basis points lower than in 2023-24 (PA). Ongoing improvement in the quality of fiscal adjustment is also reflected in the declining revenue expenditure to capital outlay (RECO) ratio. Alongside, the share of borrowings directed towards growth- inducing capital outlay has increased from 47.6 per cent in 2023-24 (PA) to 55.7 per cent in 2024-25 (BE). Consequently, the central government’s debt is projected to fall to 57.1 per cent of GDP in 2024-25 (BE) from 58.4 per cent of GDP a year ago, further consolidating public finances.
The states’ combined GFD-GSDP ratio for 2024-25 is budgeted at 3.0 per cent, unchanged from the level in 2023-24 (PA). The increase in their capital expenditure has improved the quality of spending, as reflected in the RECO ratio and the share of capital outlay in total expenditure (COTE). Alongside, states’ debt-to-GDP ratio declined to 27.6 per cent by March 2024 from the pandemic high of 31.0 per cent of GDP in March 2021. The ratio of interest payments to revenue receipts has also moderated.
The central bank noted that although India’s general government debt and deficit are higher than peer EMDEs, they are projected to continue to decline over the medium-term. Debt dynamics exhibit sustainability due to robust economic growth and lower primary deficits as a direct consequence of fiscal consolidation. The interest rate-growth rate differential (r-g) remains favourable, which augurs well for debt sustainability (Chart 1.42 a). Growth-inducing expenditures such as spending on social and physical infrastructure, climate mitigation, digitalisation and skilling the labour force can further improve productivity, outweigh short-run costs, yield long-term growth.
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