India's fiscal deficit in April-August period narrows to 27% of full-year target

In absolute terms, the fiscal deficit -- the gap between expenditure and revenue -- was at Rs 4,35,176 crore as of August-end, according to data released by the Controller General of Accounts (CGA).

New Delhi: India's fiscal deficit in April-August period of the current financial year narrowed to Rs 4.35 lakh crore or 27% of the annual estimate from Rs 6.4 lakh crore or 36% of the full year target recorded in the previous year, aided by higher dividend payout from the RBI and contraction in capital expenditure due to Lok Sabha elections, official data showed on Monday.

The government's capital expenditure or spending on development of infrastructure declined to Rs 3.01 lakh crore in the first five months of the current financial year as against Rs 3.74 lakh crore recorded in the corresponding period of the last year.

The government’s capex in April-August period is 27.09% of the full year target of Rs 11.11 lakh crore announced in the budget.

Total Expenditure incurred by Government of India in the first five months of the current financial year stood at Rs 16.52 lakh crore (34.3% of the full year target). Out of this Rs 13.51 lakh crore is on revenue account.

Out of the total revenue expenditure, Rs 4 lakh crore is on account of interest payments and Rs 1.78 lakh crore is on account of major subsidies, data released by the Finance Ministry showed.

After doubling on a year-on-year basis in July 2024, the government’s capex contracted by a sharp 30% to Rs 39,700 crore in August 2024 from Rs 56,700 crore in the corresponding month of last year. Heavy rains during the month of August impacted the infrastructure development work.

“Given the trends in capex during April-August 2024, the Government of India needs to incur a capex of Rs 1.2 lakh crore per month during the last seven months of the fiscal, which portends an ambitious expansion of 41% relative to the same period of FY2023,” said Aditi Nayar, Chief Economist at ICRA.

“We believe that sustaining such a high average monthly run rate seems improbable and expect the capex target of Rs 11.1 trillion for FY2025 to be missed by a small margin,” she added.

“Given continuing global economic slowdown, India’s growth depends much on domestic demand which in turn has been driven by the government's infrastructure push in recent years. All efforts should be made to avoid any slowing down of this important growth engine,” said DK Srivastava, Chief Policy Advisor, EY India.

The central government’s total earnings during the April-August period of the current financial year stood at Rs 12.17 lakh crore, which is 38% of the full year target.

The total receipts included Rs 8.73 lakh crore tax revenue (net to centre), Rs 3.34 lakh crore non-tax Revenue and Rs 8,866 crore of non-debt capital receipts.