Government’s Fiscal Focus: Prioritizing Quality Spending and Fiscal Discipline
Introduction
The central government has reaffirmed its commitment to strengthening macroeconomic stability by focusing on quality spending, expanding social security for vulnerable populations, and achieving fiscal discipline. These objectives, outlined in the Finance Ministry's half-yearly review and the Budget 2024-25, are central to India’s economic roadmap.
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A Targeted Approach to Fiscal Deficit Reduction
The Centre aims to bring the fiscal deficit to 4.5% of GDP by FY 2025-26, adhering to the fiscal consolidation path announced in the FY 2021-22 Budget. The fiscal deficit for FY 2024-25 was estimated at ₹16.13 lakh crore, representing 4.9% of GDP. By the first half of FY25, the fiscal deficit stood at ₹4.75 lakh crore, or 29.4% of the Budget Estimate (BE).This reduction strategy relies on a balanced mix of market borrowings (₹11.13 lakh crore) and alternative sources like the National Small Savings Fund (NSSF) and external debt.
Boosting Capital Expenditure for Sustainable Growth
Capital expenditure remains a cornerstone of the government’s strategy, with an effective Capex target of ₹15.02 lakh crore for FY 2024-25. This focus on infrastructure development is designed to stimulate long-term growth and offset global economic uncertainties caused by geopolitical tensions in Europe and the Middle East.In the first half of FY25, the government utilized ₹21.11 lakh crore, accounting for 43.8% of the total estimated expenditure of ₹48.21 lakh crore. Of this, ₹11.11 lakh crore was allocated for capital investments, emphasizing the importance of building national assets.
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Social Security and Quality Spending: A Dual Focus
The government is equally committed to improving public welfare. According to the Finance Ministry’s economic review, initiatives are underway to expand the social security net for underprivileged sections of society. This includes targeted spending on healthcare, education, and rural development, ensuring that economic growth translates to improved living standards.
Tax Revenue Trends and Fiscal Stability
The gross tax revenue (GTR) for FY 2024-25 was projected at ₹38.40 lakh crore, with a tax-GDP ratio of 11.8%. Net tax revenue for the Centre stood at ₹25.83 lakh crore, complemented by non-tax revenue of ₹5.46 lakh crore.
Challenges Ahead
Despite progress, risks to economic growth persist. These include global inflationary pressures, volatile energy prices, and potential slowdowns in key export markets. Addressing these challenges will require a delicate balance between fiscal prudence and growth-centric policies.
Looking Forward: Budget 2025-26
Finance Minister Nirmala Sitharaman is expected to present the Union Budget on February 1, 2025, which will outline measures to further India’s fiscal and economic goals. As the government navigates these priorities, its focus on quality spending and fiscal discipline will be instrumental in sustaining India’s economic momentum.
India’s fiscal strategy is not just about numbers—it’s about ensuring growth with stability, creating opportunities, and building a resilient economy for the future.
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