New Delhi [India], December 16 : The fiscal deficit of the central government is projected to be 4.8 per cent of GDP for FY25, slightly below the budgeted estimate of 4.9 per cent, according to a report by CareEdge Ratings. The marginal improvement is attributed to healthy tax collections, despite certain shortfalls.
It said "Overall, we project the fiscal deficit at 4.8 per cent of GDP, marginally lower than the budgeted 4.9 per cent".
The report also noted that the Gross tax revenue has seen strong performance in goods and services tax (GST) and income tax collections. These gains have helped cushion the impact of weaker collections in corporate tax and union excise duties.
However, the Centre's capital expenditure (capex) is expected to fall short of its target by Rs 1.5 trillion, which could impact long-term infrastructure growth. At the same time, revenue expenditure might exceed budget estimates due to additional allocations under the first supplementary grant.
It said "Gross tax revenue supported by healthy performance in GST and income tax collection. This has helped partially offset the weakness in corporate tax and union excise duty collections".
The report noted that the nominal GDP growth is estimated to be lower at 9.9 per cent, compared to the budgeted 10.5 per cent for FY25. Despite this moderation, India's real GDP growth is expected to remain healthy at 6.5 per cent in FY25. The report also predicts moderation in consumer price index (CPI) inflation, as food prices stabilize.
The central government is anticipated to maintain its fiscal consolidation efforts, keeping the fiscal deficit trajectory on track.
On the external front, India's export performance is expected to be mixed. Merchandise exports are projected to grow modestly by 2.5 per cent in FY25, as global uncertainties weigh on demand.
However, services exports are forecast to grow robustly by 13 per cent, supported by sectors like IT and professional services. Additionally, remittances are likely to remain strong, further aiding the current account balance.
India's current account deficit (CAD) is projected to remain manageable at 0.9 per cent of GDP for FY25, reflecting resilience in the external sector.
Overall, the report paints a balanced picture of the economy, with positive tax revenue trends and services exports offsetting some challenges in capex and merchandise trade.
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