Fiscal Deficit for FY24 at 95.3% of Budgetary Target

By: Manya Upreti

A significant contributor to the improved fiscal deficit was the record capital surplus distributed by the Reserve Bank of India (RBI) to the central government. For FY24, the RBI's dividend amounted to ₹2,10,874 crore, a substantial 141.23% increase over the previous year.

India's fiscal deficit for FY24 stood at Rs 16.54 lakh crore, narrowly missing the budgetary target of Rs 17.86 lakh crore. This translates to 95.3% of the budgetary target, according to the Comptroller General of Accounts (CGA). Published on May 31, 2024, these figures highlight the government's effective fiscal management amid a challenging economic landscape.

Despite initial skepticism, the fiscal deficit as a percentage of GDP came in at a commendable 5.6% for FY24. This was better than the revised estimate of 5.8% and significantly lower than the original estimate of 5.9%. The reduction in the fiscal deficit can be attributed to several strategic moves by the government.

Higher-than-expected tax revenues and non-tax revenues played a crucial role in the fiscal success recorded in the previous financial year. The government also exercised stringent controls on revenue spending. Additionally, the capex spending was moderated in the last quarter of FY24 due to impending elections and fiscal prudence considerations. This deliberate slowdown in capex growth, from 30% in the previous two fiscal years to just 11% in FY25, helped maintain the fiscal balance. However, it is worth noting that some fiscal outlays were deferred to FY25, evident from the fact that April 2024 accounted for nearly 12.5% of the full-year FY25 fiscal deficit. Despite these deferrals, the government's ability to balance capex, fiscal prudence, and revenue generation has been noteworthy.

A significant contributor to the improved fiscal deficit was the record capital surplus distributed by the Reserve Bank of India (RBI) to the central government. For FY24, the RBI's dividend amounted to ₹2,10,874 crore, a substantial 141.23% increase over the previous year and 106.74% higher than the interim budget estimate. This surge was fueled by the RBI's robust revenues from various sources, including interest on global bonds, repo-related activities, gains from forex, and revaluation of gold and dollar reserves.

Over the past few years, India has faced considerable economic challenges, from global economic uncertainties to domestic issues such as the COVID-19 pandemic. Despite these hurdles, the government's fiscal discipline and strategic financial management have steadily improved the fiscal deficit. Moving forward, the government aims to continue this trajectory by focusing on sustainable revenue generation, prudent spending, and strategic investments. The reduction in capex growth to 11% for FY25 suggests a cautious approach, balancing the need for development with fiscal responsibility.