NEW DELHI (Aryavarth): Buoyed by improvements in revenue collection, the government has lowered the fiscal deficit target to 4.9 percent for the current financial year, up from the 5.1 percent estimated in February’s interim budget.
Finance Minister Nirmala Sitharaman, however, retained the fiscal deficit estimate of 4.5 percent for 2025–26, as announced in February.
“For the years 2024–25, the total receipts other than borrowings and the total expenditure are estimated at Rs 32.07 lakh crore and Rs 48.21 lakh crore, respectively. The net tax receipts are estimated at Rs 25.83 lakh crore. The fiscal deficit is estimated at 4.9 percent of GDP,” she said while presenting the budget in Lok Sabha.
In absolute terms, the fiscal deficit has accordingly come down to Rs 16.14 lakh crore against Rs 16.85 lakh crore estimated earlier for the current financial year.
“The fiscal consolidation path announced by me in 2021 has served our economy very well, and we aim to reach a deficit below 4.5 percent next year. The government is committed to staying the course.
“From 2026–27 onwards, our endeavour will be to keep the fiscal deficit each year such that the central government debt will be on a declining path as a percentage of GDP,” she said.
Explaining this, Finance Secretary T. V. Somanathan said the intention would not be on deficit numbers post-FY26 but rather to look at the debt-to-GDP ratio in a normal year.
“The reason for this is that a fixed figure that was historically enshrined in the FRBM Act in the past does not take into account the debt dynamics of fast-growing economies like India. What is sustainable in a fast-growing economy is very different from debt in a slow-growing economy,” he said.
The deficit that a fast-growing country like India can support in a particular year without expanding debt is not necessarily 3 percent but much higher than that, he said.
“So each year’s calibration will be done based on a percentage that will keep our debt on a reducing path. That will come closer to year when it comes into effect,” he added.
The government has also cut its gross market borrowing target by about Rs 12,000 crore to meet the fiscal deficit, the gap between revenue receipt and expenditure.
The gross market borrowings have now been revised downward to Rs 14.01 lakh crore from Rs 14.13 lakh crore estimated in February.
“The gross and net market borrowings through dated securities during 2024–25 are estimated at Rs 14.01 lakh crore and Rs 11.63 lakh crore, respectively. Both will be less than that in 2023–24,” Sitharaman said.
Gross borrowing was Rs 15.43 lakh crore, the highest ever, in 2023–24.
“The budget underlines the government’s priority of inclusive growth with prudent fiscal practices. The fiscal deficit target has been set lower than market expectations at 4.9 percent of GDP for FY25,” Vishal Kampani, Non-Executive Vice Chairman, JM Financial Limited, said.
Fiscal math looks credible and is in line with the interim budget announcements, indicating that the government is utilising the income tax buoyancy in the right areas, he added.
