Fiscal deficit for FY25 overshoots target by 50 bps at 100.5%

2 Jun 2025 , 10:54 AM

FISCAL DEFICIT CLOSES FY25 AT 100.5% OF TARGET

The build-up in fiscal deficit was rapid in the March quarter. India had closed December 2024 with fiscal deficit at 56.7% of full year target. In last 3 months, fiscal deficit surged from 56.7% to 100.5% of the target, although this includes a marginal lowering of fiscal deficit target for FY25. Against the target of 4.8% of GDP, the fiscal deficit marginally spilled over in absolute terms, but in relative terms, it was in control at 4.77%. The government is targeting an aggressive fiscal deficit target of 4.4% of GDP in FY26; which will be testing, amidst hostile border situation and Trump tariffs.

FY25 FISCAL DEFICIT – FIRST BLOOD FOR FISCAL PRUDENCE

The table is a summary of government receipts, expenditures, and fiscal deficit for FY25.

Item Heads	Budget Estimate FY25 (₹ in Crore)	Actuals for FY25 (₹ in Crore)	Actuals to Target (% achieved)
Revenue Receipts	30,87,960	30,36,429	98.3%
Tax Revenue (Net)	25,56,960	24,98,885	97.7%
Non-Tax Revenue	5,31,000	5,37,544	101.2%
Non-Debt Capital Receipts	59,000	41,818	70.9%
Total Receipts	31,46,960	30,78,247	97.8%
Revenue Expenditure	36,98,058	36,03,510	97.4%
Capital Expenditure	10,18,429	10,52,007	103.3%
Total Expenditure	47,16,487	46,55,517	98.7%
Fiscal Deficit	15,69,527	15,77,270	100.5%
Revenue Deficit	6,10,098	5,67,081	92.9%
Primary Deficit	4,31,587	4,60,927	106.8%

Data Source: Controller General of Accounts (CGA)

Here is our fiscal deficit evaluation for FY25. At ₹15.77 Trillion, the actual fiscal deficit for FY25 was 4.77% of GDP; within the 4.8% government target. That is because, FY25 nominal GDP came in at ₹330.68 Trillion, which supported a higher level of fiscal deficit. While revenues fell behind targets, the pressure is not coming from revenue spending. The fiscal deficit has been fortunately spurred in FY25 by a surge in capex to 103.3% of FY25 target.

GOVERNMENT RECEIPTS STORY IN FY25

The year started with ₹2.11 Trillion from RBI dividends for FY24, shown as central revenues for FY25. Tax revenues were robust, but buoyancy of FY24 was missing. Against reduced receipts target of ₹31.47 Trillion, central government achieved 97.8% of reduced target at ₹30.78 Trillion in FY25. There was marginal underperformance on this front. Pressure came from net tax revenues, which was 97.7% of full-year target; albeit partially offset by non-tax revenues; including RBI dividends, PSU dividends, and monetization of infrastructure assets.

GOVERNMENT SPENDING STORY IN FY25

The year saw a delectable dichotomy in spending. Total expenditure in FY25 at ₹46.56 Trillion was 98.7% of full year target. There was a favourable surge in capex spending at ₹10.52 Trillion in FY25, against full-year target of ₹10.18 Trillion. Much of this was on defence, as government front-ended defence purchases in the midst of a hostile border situation. There was a clear attempt to go slow on revenue spends and allocate more resources to capex spending. Some expenses were postponed, but capex urgency is positive.

TALE OF 2 DEFICITS: FISCAL AND REVENUE DEFICIT

Let us finally look at how the 2 principal deficits; fiscal deficit and revenue deficit panned out in FY25. Fiscal deficit at ₹15.77 Trillion was higher than full year target of 15.70 Trillion. However, since nominal GDP was robust, the FY25 fiscal deficit was contained at 4.77% of GDP (under 4.8% target). What about revenue deficit for FY25? At ₹5.67 Trillion, the revenue deficit was well within target and closed the year at 92.9% of full year target. As a result, ratio of revenue deficit to fiscal deficit for FY25 stood at a comfortable 36.0%. However, 4.4% of GDP in FY26 may be a bigger challenge for the government!