India's fiscal deficit Apr-May fiscal deficit at 3% for full FY25 target

The government aims to attain a fiscal deficit target of 5.1% of GDP for the current financial year, with plans to reduce it to 4.5 percent by the end of 2025-26.

During April-May, revenue receipts surpassed expenditures, resulting in a surplus of Rs 90,923 crore.

This surplus was driven by higher tax revenue and the RBI dividend, with revenue receipts reaching 19 percent of the budgeted estimates, compared to about 15 percent in the same period last year. Government spending during this period was affected by the general elections.

In FY24, the fiscal deficit stood at Rs 16.54 trillion, below the budgetary target of Rs 17.86 trillion, thanks to higher-than-expected tax receipts.

The fiscal deficit was contained at 5.6 percent of GDP, compared to the revised estimate of 5.8 percent.

The Interim Budget in February had initially revised the fiscal gap estimate from 5.9 percent to 5.8 percent of GDP for FY24. A fiscal deficit occurs when government spending exceeds its revenue.

Experts suggest that the windfall from the RBI dividend could provide the government with an additional Rs 1 trillion for increased expenditures or greater fiscal consolidation.

S&P Global Ratings recently indicated that it will monitor India's fiscal consolidation efforts over the next two years and might consider a ratings upgrade if the government remains committed to its fiscal glide path.