FY 25 Fiscal deficit target of 5.1% may be retained in Budget

Fiscal deficit target of 5.1% of Gross domestic product (GDP) could be retained by Union Finance Minister Nirmala Sitharaman, as per three officials who are a part of the policy making team involved in the initial decision making process for the FY24 budget.

This proposal was made considering the coalition government assuming power at the centre and a likely boost for higher capital expenditure (capex). Expectations regarding special financial packages from coalition parties such as Telgu Desham Party and Rashtriya Janata Dal remain high.

There would not be much difference in the fiscal glide path for FY25 and the one presented in the Interim Budget. However, such decisions need to look at political views and will be reviewed more closely with the full budget.

The Record dividend payment of ₹2.11 trillion by RBI would act as a strong cushion for the government, fuelling growth.

Fiscal deficit target for FY25 was set at 5.1% of GDP or ₹16.85 trillion, while the FY24 target was revised from 5.9% to 5.8%. It has further reduced to 5.6% with release of provisional figures by the Controller General of Accounts.

Several experts believe that the government would perform well by following the current fiscal glide path. Additionally, industry representatives have approached the government to be more aggressive on Capex by increasing it by 25% over the revised estimates for FY24.