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India’s FY25 fiscal deficit calculations could get impacted with the economy, in nominal terms, forecast to expand by 9.6% in FY25, lower than the 10.5% growth estimated in the budget, said economists.
If the final fiscal deficit for FY25 is as projected in the budget at ₹16.1 lakh crore, lower nominal GDP, numbers not adjusted for inflation, would push the fiscal deficit ratio to 4.98% of the GDP from the targeted 4.94%.
The government estimated nominal GDP at ₹326.4 lakh crore in the FY25 budget. However, the first advance estimates have placed it lower at ₹324.1 lakh crore.
“Given the expectations of a large miss in the capex target, we expect the fiscal deficit print to trail the 2024-25 revised budget estimates, which would largely offset the lower-than-budgeted nominal GDP print,” said Aditi Nayar, chief economist at ICRA. The fiscal deficit to GDP ratio will only marginally trail the budget estimate, she added.
Sakshi Gupta, principal economist at HDFC Bank, said that the government is likely to achieve a lower fiscal deficit of 4.65% of GDP, helped by higher-than-budgeted gross tax collections combined with lower-than-estimated capital expenditures.
According to the data released last month, India’s capital expenditure declined by 12.3% year-on-year during April-November due to general elections in the first quarter and heavy rains subsequently.
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.
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