India’s fiscal deficit calculations for FY25 could be affected as the economy, in nominal terms, is expected to grow by 9.6% in FY25, lower than the budget’s estimated growth of 10.5 %, according to economists.
If the final fiscal deficit for FY25 as projected in the Budget comes to ₹16.1 lakh crore, lower nominal GDP, figures not adjusted for inflation, would push the fiscal deficit ratio to 4.98% of GDP from the targeted 4.94% .
The government estimated nominal GDP in the FY25 budget at ₹326.4 lakh crore. However, initial advance estimates have placed it lower at ₹324.1 lakh crore.
“Given expectations of a major miss in the capex target, we expect the fiscal deficit to lag the revised 2024-2025 budgets, which would largely offset lower-than-budgeted nominal GDP pressures,” said Aditi Nayar, chief economist. at ICRA. The fiscal deficit-to-GDP ratio will lag only marginally behind the budget estimate, she added.
Sakshi Gupta, chief economist at HDFC Bank, said the government is likely to post a lower fiscal deficit of 4.65% of GDP, helped by higher-than-budgeted gross tax collections coupled with lower-than-projected capital expenditure.
According to data released last month, India’s capital expenditure fell 12.3% year-on-year in the April-November period due to the general elections in the first quarter and subsequent heavy rains.
The expenditure accounted for 46.2% of the annual target of ₹11.1 lakh crore in April-November, compared to 58.5% in the corresponding period last year.
