New Delhi: The Centre’s fiscal deficit until February in this financial year touched 85.8% of the revised annual target, compared with 86.5% a year before, thanks to tight spending, particularly capital expenditure, showed official data released on Friday.
The data bolsters chances of the government meeting its fiscal deficit target of 4.8% of gross domestic product (GDP) in 2024-25, despite low disinvestment proceeds and the recently approved supplementary demands for grants, analysts said.
Some, however, said the fiscal deficit could fall below 4.8%, aided by higher-than-expected nominal GDP.
In absolute terms, the fiscal deficit stood at Rs13.47 lakh crore until February in this fiscal, down 10.3% from a year earlier.
The deficit in February alone moderated 55.5% year-on-year to Rs 1.77 lakh crore.
Capital expenditure contracted 35.4% last month from a year before to Rs54,528 crore, dragging down the growth until February this fiscal to a six-year low of 0.8%, against the curtailed annual target of a 7.3% increase.
Analysts expect the capex, which touched Rs8.12 lakh crore until February, to fall short of the revised 2024-25 goal of Rs10.18 lakh crore, making it easier for the government to control the fiscal deficit.
Capex was hit earlier in this fiscal owing to election-induced uncertainties in project execution.
Meanwhile, revenue spending declined 12.8% year-on-year in February to Rs2.69 lakh crore.
Between April 2024 and February this year, revenue spending increased 4.7% year-on-year to Rs30.81 lakh crore, having fallen short of the full-year target of a 5.8% increase.
ICRA chief economist Aditi Nayar said the government’s capex needs to expand by about 44% year-on-year in March to meet the revised estimate for 2024-25, which she said “appears to be a tall ask”.
Nayar expects the fiscal deficit to be largely in line with the revised estimate (in absolute terms) of Rs15.7 lakh crore. If the National Statistical Office’s upward revision of 2024-25 nominal growth projection last month holds true, the fiscal deficit will be contained at 4.7% of GDP, she added.
The government’s net tax revenue increased 9% until February, against the full-year target of 9.9%, as per the latest data. This implies a required growth of 13% in March to meet the revised annual target, which “seems achievable given the modest uptick in tax devolution in the month”, Nayar said.
However, riding the record central bank dividend, non-tax revenue surged 36.9%, against the annual goal of 32.2%.