The government aims to improve the quality of spending and reduce the fiscal deficit to 4.5% in fiscal year 2026: Ministry of Finance report

The government is focusing on improving the quality of public spending, strengthening the social safety net, and reducing the fiscal deficit to 4.5% of GDP by fiscal year 2026, according to the Ministry of Finance report.

Finance Minister Nirmala Sitharaman will present the Budget for FY 2025-26 in Parliament on February 1.

The Union government remains committed to following the fiscal consolidation path outlined in the FY 2021-22 Budget, with a target of reducing the fiscal deficit to less than 4.5% of GDP by FY 2025-26, according to Finance Ministry data on the bi-annual budget review. Trends in revenues, expenditures and deviation in meeting government obligations under the Fiscal Responsibility and Budget Management Act of 2003.

This review also examined any deviations from the Fiscal Responsibility and Budget Management Act, 2003. The data was presented in the Lok Sabha last week.

The report highlights that the focus will be on improving the quality of public spending while strengthening the social security system for vulnerable groups. This approach is expected to strengthen the country’s macroeconomic fundamentals and maintain overall financial stability.

Data indicate that the 2024-2025 budget was drafted amid global uncertainty, including ongoing conflicts in Europe and the Middle East. However, India’s strong macroeconomic fundamentals have protected the country from global economic turmoil, allowing it to continue chasing growth while maintaining fiscal discipline.

“It has also helped the nation continue to grow through fiscal consolidation. As a result, India maintains its prestigious position as one of the fastest growing economies in the world. However, risks to growth remain.”

The total estimated expenditure for FY 2024-25 is around Rs 48.21 lakh crore, with Rs 37.09 lakh crore allocated to revenue and Rs 11.11 lakh crore allocated to capital expenditure, according to the Budget Estimate (BE). In the first half of FY25, the government spent Rs 21.11 lakh crore, nearly 43.8 per cent of the balance sheet.

When grants for creation of capital assets are included, the actual capital expenditure was expected to be Rs 15.02 lakh crore. The Gross Tax Revenue (GTR) was estimated at Rs 38.40 lakh crore, resulting in a tax to GDP ratio of 11.8 percent.

The Centre’s total non-debt receipts were estimated at Rs 32.07 lakh crore, comprising Rs 25.83 lakh crore in net tax revenue, Rs 5.46 lakh crore in non-tax revenue and Rs 0.78 lakh crore in miscellaneous capital receipts.

Based on these estimates, the fiscal deficit for FY 2024-25 was expected to be Rs 16.13 lakh crore, or 4.9% of GDP. In the first half of FY25, the fiscal deficit is estimated at Rs 4.75 lakh crore, or about 29.4% of the full-year estimate.

The fiscal deficit is planned to be financed through Rs 11.13 lakh crore raised from the market (treasury bills and government securities) and the remaining Rs 5 lakh crore through other sources like National Small Provident Fund (NSSF), State Provident Fund, and external funds. Debts and cash withdrawals.