India's Fiscal Health Shows Signs of Discipline

New Delhi: In a display of fiscal discipline, the Centre's fiscal deficit until February this financial year reached 85.8% of the revised annual target, slightly better than the 86.5% recorded in the previous year. This improvement is attributed to stringent spending controls, especially in capital expenditure, as per the latest official data.

Analysts Optimistic About Meeting Fiscal Targets

Analysts are buoyed by the data, suggesting that the government is on track to meet its fiscal deficit target of 4.8% of GDP for 2024-25. This optimism persists despite challenges such as lower-than-expected disinvestment proceeds and recent supplementary demands for grants. Some even speculate the deficit might dip below 4.8%, thanks to a higher-than-anticipated nominal GDP.

Capital Expenditure Takes a Hit

Capital expenditure saw a significant contraction of 35.4% in February compared to the previous year, amounting to Rs54,528 crore. This slowdown has dragged the annual growth rate to a six-year low of 0.8%, against a revised target of a 7.3% increase. Experts believe the capex, standing at Rs8.12 lakh crore until February, may not meet the revised goal of Rs10.18 lakh crore for 2024-25.

Revenue Spending and Tax Collections

Revenue spending in February decreased by 12.8% year-on-year to Rs2.69 lakh crore. However, from April 2024 to February, it saw a 4.7% increase, totaling Rs30.81 lakh crore, though it fell short of the annual target. On the brighter side, net tax revenue grew by 9% until February, and non-tax revenue surged by an impressive 36.9%, exceeding the annual goal.

Looking Ahead

With the fiscal deficit at Rs13.47 lakh crore until February, down 10.3% from the previous year, and a moderated deficit of Rs1.77 lakh crore in February alone, the government's fiscal strategy appears to be bearing fruit. However, achieving the revised capex target will require a significant push in March.