Economic Survey Expects India's Fiscal Deficit To Drop To 4.5 Per Cent In FY25, Nirmala Sitharaman Will Have To Revise Target

The Economic Survey 2023-24 expects India's fiscal deficit to drop to 4.5 per cent of the Gross Domestic Product (GDP) in FY25 and lower down further in FY26.

In the Interim Budget presented in February, Finance Minister Nirmala Sitharaman aimed to bring the fiscal deficit to 5.1 per cent in FY25.

However, given the economic survey prediction, economists expect Sitharaman to set a target of curtailing fiscal deficit below 4.5 per cent.

The Economic Survey, published annually by the Department of Economic Affairs, highlighted that India's fiscal deficit decreased from 6.4 per cent in FY23 to 5.6 per cent in FY24.

This reduction was driven by robust growth in direct and indirect tax revenues due to resilient economic activities.

Additionally, improved tax compliance contributed to higher tax collections, surpassing the budgetary estimates.

The report also mentioned that revenue receipts were bolstered by non-tax revenue exceeding budget estimates, particularly from Reserve Bank of Inda (RBI) dividends.

"A decomposition of the fiscal deficit over the past few years reveals that with a narrowing revenue deficit, a larger share of the fiscal deficit is being accounted for by capital outlay. This suggests that the productivity of borrowed resources has improved," the survey says.