Government on Track to Meet FY25 Fiscal Deficit Target of 4.8%: Bank of Baroda Report
Oman Horizon Bulletin
New Delhi: The central government is on course to achieve its fiscal deficit target of 4.8% of GDP for the financial year 2024-25 (FY25), according to a report by Bank of Baroda.
The report attributes this progress to higher-than-expected nominal GDP growth, steady revenue receipts, and controlled expenditure growth. “We believe that the government remains on track to meet its fiscal deficit target of 4.8% for FY25,” the report stated.
Key Factors Supporting Fiscal Discipline
- Stronger GDP Growth:
- The nominal GDP growth rate is expected to be 9.9%, slightly above the 9.7% projected in the Union Budget.
- A higher GDP growth rate typically leads to better revenue collections, supporting fiscal deficit targets.
- Controlled Government Spending:
- Due to general elections, government spending was relatively slow in the first half (H1) of the fiscal year.
- However, spending picked up in H2, ensuring expenditure remains aligned with targets.
- As of January 2025, the government has utilized 75.7% of its revised expenditure estimate, compared to 74.7% in the same period last year.
- Steady Revenue Receipts:
- Despite some slowdown in corporate tax collections, revenues from indirect taxes, including customs duties and CGST, have improved.
- Income tax collections have remained stable, further supporting overall revenue growth.
Sector-Wise Spending Trends
Several key ministries, including Railways, Consumer Affairs, Rural Development, Defence, Home Affairs, Education, and Health, have spent more as a percentage of their revised estimates compared to last year.
However, as ministries near their revised spending targets, the pace of expenditure is expected to moderate in the coming months.
Outlook for FY25
With strong revenue collections and disciplined spending, the Bank of Baroda report anticipates that fiscal discipline will be maintained for the remainder of FY25. These factors collectively indicate that the government is well-positioned to successfully meet its fiscal deficit target of 4.8%.
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