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Informist, Wednesday, Dec. 11, 2024

 

--Fin min source:Room to cut FY25 fiscal deficit 10-20 bps below 4.9% target

--Fin min source: Likely to cut FY25 fiscal deficit more on robust revenues

--Fin min source: Expect govt capex to pick up pace going ahead

 

By Sagar Sen and Priyasmita Dutta

 

NEW DELHI – The Indian government has the space to reduce its fiscal deficit for 2024-25 (Apr-Mar) more than it has indicated, with a senior finance ministry official telling Informist on Wednesday that it could be lowered by 10-20 basis points below the Budget target of 4.9% of GDP. The fiscal deficit target for this year is part of the medium-term roadmap set out by the government, which aims to reduce the deficit to below 4.5% by March 2026. It was at 5.6% in FY24.

 

"The revenues are robust so far in the year. We feel that there may be room to reduce the fiscal deficit by at least 10 bps. 20 bps may be a bit more ambitious," the official told Informist on the condition of anonymity.

 

While the Centre's fiscal deficit worsened sharply in October, rising 171% on year to INR 2.763 trillion, it remains well on track to meet the full year target. For Apr-Oct as a whole, the fiscal deficit was INR 7.508 trillion, down 6.6% on year, accounting for 46.5% of the FY25 target of INR 16.133 trillion. As such, several economists think the fiscal deficit target may either be comfortably met or undershot, primarily due to the weak progress of capital expenditure. However, the finance ministry official said Wednesday that "going ahead, we expect the public capex to pick up pace".

 

Analysts, too, are predicting a sharp increase in capex in the second half of the year. "On our recent trip to Delhi, the consensus view was that the capex slowdown in 1HFY25 (Apr-Sept) has been largely led by the elections and the monsoons. A robust recovery is expected in 2HFY25 (Oct-Mar), with many projects now being bid out and execution likely to accelerate. The FY25 target of INR 11.11 trillion may be missed, but a strong sequential growth is expected after a sluggish 1HFY25 (Apr-Sept)," Seshadri Sen, head of research and strategist at Emkay Global Financial Services, said in a note on Tuesday.

 

October saw an 8?cline in the Centre's capex even as total expenditure rose 32% year on year due to a jump in revenue expenditure. For the first seven months of FY25, capital expenditure is now 15% lower compared to last year, making the achievement of the full-year target of INR 11.11 trillion a tall task. So far this year, the government has only spent 42.0% of its full-year capital expenditure target, down from 54.7% in Apr-Oct 2023.  End

 

Edited by Akul Nishant Akhoury

 

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