Deficit Within Limits

The Government of India has met its revised fiscal deficit target of 4.8% of GDP for the financial year 2024–25, despite lower-than-expected receipts from income tax and disinvestment, as per provisional data released by the Controller General of Accounts.

Fiscal Deficit Contained at 4.8% in FY25 Despite Revenue Shortfalls

Fiscal Deficit Achievements: FY2024–25

• The Controller General of Accounts (CGA) has reported that the fiscal deficit stood at ?15.77 lakh crore, amounting to 8% of GDP, exactly matching the revised estimates set out in the Union Budget.
• This outcome reflects a careful balance between expenditure control and revenue mobilisation, amid economic uncertainties and slower-than-expected asset monetisation.

Components of Fiscal Deficit Performance

• Total Revenue Receipts: ?30.78 lakh crore (97.8% of RE)
  • Tax Revenue:
    • Corporate Tax: ?9.87 lakh crore (+0.7% over RE)
    • Income Tax: ?11.83 lakh crore (?6% below RE)
  • Non-Tax Revenue: Realised but details not disclosed explicitly in the release.
• Capital Receipts:
  • Miscellaneous Capital Receipts (incl. disinvestment): ?17,202 crore (52.1% of RE)
  • Disinvestment Realisation: ?10,131.32 crore, significantly below target

• Total Expenditure: ?46.55 lakh crore (97.8% of RE)
  • Indicates adherence to spending targets without fiscal slippage.

Structural Insights for Reform"

• Recurrent issue over multiple fiscal years.
• Reflects: It reflects execution delays, Market volatility, Strategic hesitation and institutional bottlenecks, Weak investor sentiment for certain PSUs

• Shortfall in income tax despite efforts at digital compliance.
• Points to: Persistent informal economy, Tax evasion, Inadequate widening of the direct tax net

• While corporate tax slightly exceeded estimates, it may not remain resilient under external shocks or slowdowns.

Implications for Fiscal Policy and Macroeconomic Stability

Positive Takeaways

• Fiscal discipline maintained amid headwinds.
• Strengthens India’s macroeconomic credibility with institutions like IMF, credit rating agencies, and foreign investors.
• Reinforces adherence to the FRBM Act targets for medium-term fiscal consolidation.

Concerns

• Revenue vulnerability continues to limit fiscal space for development spending.
• Shortfalls in capital receipts may force increased borrowing, affecting debt sustainability in the long run.
• Reliance on expenditure compression rather than robust revenue generation raises questions about long-term growth-supportive fiscal strategy.

Way Forward

• Establish a Disinvestment Execution Authority with streamlined autonomy.
• Adopt block deals and strategic sales via transparent channels (like CPSE ETF models).

• Deepen the integration of GST with Income Tax databases.
• Use AI-based analytics for compliance monitoring.
• Rationalise exemptions and plug litigation delays in high-value tax cases.

• Enact the recommendations of the FRBM Review Committee (N.K. Singh Report, 2017):
• Fiscal Council for independent oversight.
• Focus on debt-GDP ratio as the anchor metric.

• Prioritise productive capital expenditure over revenue expenditure.
• Institutionalise outcome budgeting across ministries.
• Apply zero-based budgeting to weed out obsolete schemes.