Government's Strategy to Achieve Fiscal Deficit Target

NEW DELHI: In a strategic move to meet its fiscal deficit target of 4.9% of GDP for the current financial year, the government is expected to lower its spending. This decision comes despite the first advance estimates projecting a slightly lower nominal GDP. The National Statistics Office's recent estimates peg GDP at Rs 3.24 lakh crore based on current prices, slightly below the Rs 3.26 crore used in the budget.

Based on these estimates, the government will need to limit its fiscal deficit to Rs 16,02,164 crore, which is just Rs 11,148 crore lower than the budgeted level. The government's cautious spending approach in the first half of the year, coupled with the trend of departments and ministries spending less than their allocated budgets, is likely to contribute to achieving this target.

Impact on Fiscal Calculations

The 2024-25 budget had assumed a nominal GDP growth of 10.5%, slightly higher than the AE nominal growth of 9.7%. This minor discrepancy does not significantly alter the fiscal calculations. In fact, it is estimated that the government is likely to achieve a lower fiscal deficit as a percentage of GDP of 4.65% in FY25, compared to the budgeted target of 4.9%.

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