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Fiscal deficit means the difference between the government expenditure and income. It was projected at 5.1 per cent in the Interim Budget in February, against 5.8 per cent in the last fiscal year read more
 "Fiscal deficit target lowered to 4.9% of the GDP for FY24-25, says Sitharaman")
FM Sitharaman presenting the Union Budget 2024 in India's parliament.
In her seventh consecutive budget speech, Finance Minister Nirmala Sitharaman announced that the government is targeting bringing India’s fiscal deficit down to 4.9 per cent for 2024-25.
Fiscal deficit means the difference between the government expenditure and income. It was projected at 5.1 per cent in the Interim Budget in February, against 5.8 per cent in the last fiscal year.
The government aims to reach a fiscal deficit of below 4.5 per cent by FY26, she said.
Why has fiscal deficit target gone down?
The sharp lowering of the fiscal deficit target is aided by a hefty surplus transfer from the Reserve Bank of India (RBI) and robust tax revenues.
The finance minister said gross and net market borrowing is pegged at Rs 14.01 lakh crore and Rs 11.63 lakh crore, respectively, in FY25.
The government expects net tax receipts of Rs 25.83 lakh crore in FY25 while the total receipts are pegged at Rs 32.07 lakh crore. Total expenditure is estimated at Rs 48.21 lakh crore in FY25, Sitharaman said.
In her speech, Sitharaman also said the government plans to launch ‘NPS Vatshalya’ to provide pension contributions by parents and guardians.
Why does it matter?
The target signals the government’s intention to remain fiscally prudent despite expectations it may ramp up spending on welfare programs following a weaker than anticipated election victory for Prime Minister Narendra Modi’s alliance in June.
A lower fiscal deficit will boost foreign investors’ sentiment and improve India’s chances of a sovereign rating update as it brings the country closer to its goal of narrowing the deficit to below 4.5% of GDP by fiscal year 2025/26.
A record surplus transfer of Rs 2.11 trillion ($25.3 billion) from the RBI, more than twice of what was projected in the Interim Budget in February, has helped the government narrow its fiscal deficit from the interim target.
How have bond yields been affected?
The Indian 10-year benchmark bond yield dropped 3 basis points to 6.9260 per cent after the budget announcement while the Indian rupee rose 0.04 per cent to 83.6225 against the US dollar. India’s benchmark stock indices, the BSE Sensex and the NSE Nifty 50, declined about 0.2 per cent each.
With inputs from agencies
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English (US) ·