India is on the path of fiscal prudence as the government has spent around 52.5 per cent of the budget estimate (BE) of its deficit in the first seven months of FY25, says a report by the Union Bank of India.The report highlighted that India’s fiscal deficit for the April-November period of FY25 stood at Rs 8.47 lakh crore, which is 52.5 per cent of the budgeted estimate (BE). This marks an improvement from Rs 9.07 lakh crore, or 50.7 per cent of BE, during the same period last year.
The deficit is significantly lower than the 114.8 per cent recorded in the pre-Covid era, reflecting better fiscal management.
It said, “Fiscal impulse improves in Nov’24; further pickup likely in the rest of FY25. India’s fiscal deficit for Apr-Nov FY25 came in at Rs8.47 lakh crore (52.5 per cent of BE).”
The report noted that after lagging behind the historical trends until September 2024, fiscal dynamics improved from October 2024 onward, indicating stronger fiscal momentum. A positive shift was observed in the quality of government expenditure, with revenue spending being curtailed and capital expenditure (capex) receiving a boost.
This trend is expected to continue, with a sharp increase in government spending likely in the remainder of FY25 while maintaining a focus on quality spending.
On the revenue side, non-debt capital receipts showed improvement, but concerns persist. Revenue collections were down 5.9 per cent year-on-year during April-November 2024, largely due to a decline in net recoveries of loans and slower progress in PSU divestments. These factors are likely to remain a challenge, as seen last year when only 50 per cent of budgeted revenues from these sources were achieved.
However, the report suggested that this shortfall in revenue may be offset by an undershooting of the capex target, limiting the overall fiscal impact. It said, “The slippage in this revenue source may be more than offset by the likely undershooting of the capex target, thereby limiting the fiscal impact.”
Overall, the report paints a cautiously optimistic picture of India’s fiscal trajectory, highlighting improved expenditure quality and the potential for further recovery in the coming months.