With the ambitious projection, finance minister Nirmala Sitharaman’s pre-poll budget, however, signalled strongly to the market and to rating agencies on how the central government will lower its debt level–fiscal deficit is to be cut to 5.1 per cent of GDP in FY25, from 5.9 per cent in FY24. The nominal GDP for BE 2024-25 has been projected at Rs 3,27,71,808 crore, assuming 10.5 per cent growth over the estimated nominal GDP of Rs 2,96,57,745 crore, as per the First Advance Estimates of FY2023-24.
While presenting the interim Budget 2024-25, finance minister Nirmala Sitharaman refrained from providing any tax sops or any announcement for populist measures before general elections due in the next couple of months. Helped by an improvement in tax buoyancy, the government managed to achieve a fiscal deficit of 5.8 per cent against the budget estimate of 5.9 per cent for the current financial year.
“The Revised Estimate or RE of the fiscal deficit is 5.8 percent of GDP, improving on the Budget Estimate or BE, notwithstanding moderation in the nominal growth estimates," she said while unveiling the interim Budget 2024-25. As per the Fiscal Responsibility & Budget Management (FRBM) Act, the government plans to achieve a fiscal deficit of 4.5 per cent in 2025-26.
“We continue on the path of fiscal consolidation, as announced in my Budget Speech for 2021-22, to reduce the fiscal deficit below 4.5 per cent by 2025-26. The fiscal deficit in 2024-25 is estimated to be 5.1 per cent of GDP, adhering to that path,” she said.
In absolute terms, the fiscal deficit would be Rs 16,85,494 crore against Rs 17,34,773 crore for the current fiscal. At the same, the effective revenue deficit would be 1.8 per cent in the current financial year and 0.8 per cent in the next financial year. Revenue Deficit or RD refers to the excess of revenue expenditure over revenue receipts. Effective Revenue Deficit (ERD) is the difference between a Revenue Deficit and a Grant-in-Aid for Creation of Capital Assets.
To meet the fiscal deficit, the gap between revenue receipt and expenditure, the government raises funds by issuing bonds in the market. “The gross and net market borrowings through dated securities during 2024-25 are estimated at Rs 14.13 lakh and Rs 11.75 lakh crore respectively. Both will be less than that in 2023-24. Now that the private investments are happening at scale, the lower borrowings by the central government will facilitate larger availability of credit for the private sector,” she said.
