Budget 2024: Fiscal deficit estimates, government borrowing lowered; goal to bring down debt GDP ratio from FY27

With record transfer from the Reserve Bank of India and strong growth in tax revenue, Finance Minister Nirmala Sitharaman on Tuesday proposed lowering the fiscal deficit for 2024-25 to 4.9 per cent from Interim Budget’s target of 5.1 per cent. With this, the borrowing has also been reduced

• Also read: A big push for small and medium enterprises

The focus is now on reducing the debt to GDP ratio from 2026-27 (FY27). “From 2026-27 onwards, our endeavour will be to keep the fiscal deficit each year such that the central government debt will be on a declining path as a percentage of GDP,” Sitharaman said while presenting the full Budget for FY25.

There is no change in the deficit reduction plan for FY26. “The fiscal consolidation path announced by me in 2021 has served our economy very well, and we aim to reach a deficit below 4.5 per cent next year. The government is committed to staying the course,” she said.

For the year 2024-25, the total receipts other than borrowings and the total expenditure are estimated at ₹32.07 lakh crore and ₹48.21 lakh crore, respectively. The net tax receipts are estimated at ₹25.83 lakh crore. The fiscal deficit is estimated at 4.9 per cent of GDP,” she said, while presenting the Budget in Lok Sabha. In absolute terms, the fiscal deficit has accordingly came down to ₹16.14 lakh crore against ₹16.85 lakh crore estimated earlier for the current financial year.

The government has also cut down its gross market borrowing target by about ₹12,000 crore to meet the fiscal deficit, the gap between revenue receipt and expenditure. The gross market borrowings has now revised downward to Rs 14.01 lakh crore from Rs 14.13 lakh crore estimated in February.

“The gross and net market borrowings through dated securities during 2024-25 are estimated at ₹14.01 lakh crore and ₹11.63 lakh crore, respectively. Both will be less than that in 2023-24,” she said. Gross borrowing was ₹15.43 lakh crore, the highest ever, in 2023-24.

Gene Fang, Associate Managing Director at Moody’s Ratings, said that overall the budget is credit positive and reduction in the estimates places the government’s goal of achieving a 4.5 per cent of GDP deficit by FY26 within reach. Taking into consideration the latest budget estimates, we project general government debt to stabilize above 80 per cent of GDP over the next three years, down from 89.3 per cent in fiscal 2020-21. “We also forecast general government interest payments to fall to around 24% of general government revenue over the next two years from over 28 per cent in fiscal 2020-21, although this remains much higher than the median 8.7 per cent recorded by Baa-rated peers,” he said.

Vivek Jalan, Partner at Tax Connect Advisory Services the encouraging Fiscal Deficit numbers can be dedicated to the taxpayers of the Country. “The efficiency of the CBDT and CBIC and especially the ground covered in implementation of Artificial intelligence in unearthing fake transactions have also to be appreciated by Honest taxpayers,” he said.