Govt committed to improve quality spending, cut fiscal deficit to 4.5% in FY26: Finance Ministry report

Finance Minister Nirmala Sitharaman is schedule to present the Budget for 2025-26 in Parliament on February 1, 2025. File
| Photo Credit: Nagara Gopal

The government will continue its focus on improving quality spending, strengthening the social security net and bring down the fiscal deficit to 4.5% of the GDP in FY26, a Finance Ministry document said.

Finance Minister Nirmala Sitharaman is schedule to present the Budget for 2025-26 in Parliament on February 1, 2025.

The Union government is committed to pursuing the glide path of fiscal consolidation as announced in the Budget for FY 2021-22 and to attain a level of fiscal deficit lower than 4.5% of GDP by FY 2025-26, according to Finance Ministry statements on the half yearly review of the trends in receipts and expenditure and deviation in meeting the obligations of the government under the Fiscal Responsibility and Budget Management Act, 2003.

The statements were tabled in the Lok Sabha last week.

“The thrust will be on improving the quality of public spending, while at the same time, strengthening the social security net for the poor and needy. This approach would help further strengthen the nation’s macro-economic fundamentals and ensure overall financial stability,” it said.

According to the statements, the Budget 2024-25 was presented in the backdrop of global uncertainties caused by the wars in Europe and the Middle East.

India’s sound macro-economic fundamentals have cushioned the country from the vagaries afflicting the global economy.

“It has also helped the nation pursue growth with fiscal consolidation. As a result, India retains its pride of place as one of the fastest growing economies in the world. However, risks to growth still remain,” it said.

Total expenditure was estimated at about ₹48.21 lakh crore, of which, expenditure on revenue account and capital account were estimated at about Rs 37.09 lakh crore and Rs 11.11 lakh crore, respectively, as per the Budget Estimate (BE) of 2024-25.

As against total expenditure of ₹48.21 lakh crore, the expenditure in first half of FY25 was ₹21.11 lakh crore or about 43.8% of BE.

Taking into account the grant for creation of capital assets, the effective capital expenditure (Capex) was projected at ₹15.02 lakh crore.

Gross Tax Revenue (GTR) was estimated at about ₹38.40 lakh crore with an implied tax-GDP ratio of 11.8%.

Total non-debt receipt of the Centre was estimated at about ₹32.07 lakh crore. It comprised tax revenue (net to Centre) of about ₹25.83 lakh crore, non-tax revenue of about ₹5.46 lakh crore, and miscellaneous capital receipts of ₹0.78 lakh crore.

With above estimates of receipts and expenditure, the fiscal deficit was pegged at about ₹16.13 lakh crore in BE 2024-25 or 4.9% of GDP.

In H1 of FY25, the fiscal deficit is estimated at ₹4.75 lakh crore, or about 29.4% of BE.

The fiscal deficit was planned to be financed by raising ₹11.13 lakh crore from market (G-sec + T-Bills), and the remaining amount of ₹5 lakh crore from other sources, such as NSSF, State Provident Fund, External debt, draw down of cash balance, etc.