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CareEdge Ratings projects India’s fiscal deficit at 4.8 per cent in FY25

New Delhi: CareEdge Ratings in its latest report projected  the fiscal deficit of the central government at  4.8 per cent of GDP for FY25. This is  slightly below the budgeted estimate of 4.9 per cent. This  marginal improvement is attributed to healthy tax collections, despite certain shortfalls.

Meanwhile, the  Union government’s fiscal deficit at the end of the first seven months of financial year 2024-25 touched 46.5 per cent of the full-year target. Data released by the Controller General of Accounts (CGA) showed this.

Fiscal deficit is the difference between the total expenditure and revenue of the government. It is an indication of the total borrowing that is needed by the government.

The Centre’s fiscal deficit was at Rs 7,50,824 crore during April-October period. The deficit stood at 45 per cent of the Budget Estimates (BE) in the corresponding period of 2023-24. Fiscal deficit  was at Rs 4,74,520 crore at September-end. The deficit stood at 39.3 per cent of the Budget Estimates (BE) in the corresponding period of 2023-24.

In the Union Budget, the government projected to bring down the fiscal deficit to 4.9 per cent of gross domestic product (GDP) in the current 2024-25 financial year. The deficit was 5.6 per cent of the GDP in 2023-24. In absolute terms, the government aims to contain the fiscal deficit at Rs 16,13,312 crore during the current fiscal.

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The report also noted that the Gross tax revenue has seen strong performance in goods and services tax (GST) and income tax collections. These gains have helped cushion the impact of weaker collections in corporate tax and union excise duties.

However, the Centre’s capital expenditure (capex) is expected to fall short of its target by Rs 1.5 trillion. This could impact long-term infrastructure growth. At the same time, revenue expenditure might exceed budget estimates due to additional allocations under the first supplementary grant.

Merchandise exports are projected to grow modestly by 2.5 per cent in FY25. However, services exports are forecast to grow robustly by 13 per cent. India’s current account deficit (CAD) is projected to remain manageable at 0.9 per cent of GDP for FY25.

Current account deficit occurs when the value of goods and services imported and other payments exceeds the value of export of goods and services and other receipts by a country in a particular period. Trade deficit is the difference between imports and exports of the country.

 

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