NEW DELHI: Finance Minister Nirmala Sitharaman in her interim budget 2024 speech said that the centre has set a fiscal deficit target of 5.1% for FY25, with gross borrowings at Rs 14.13 lakh crore. The fiscal deficit target has been reduced based on the assumption that there will be a surge in tax collection.
The minister said that the current fiscal deficit is expected to end at 5.8%, surpassing the budget estimate of 5.9%. Sitharaman reiterated the government's commitment to fiscal consolidation, targeting a fiscal deficit below 4.5% by FY26.
The fiscal deficit had surged from 3.8% of the GDP in FY20 to 9.5% in FY21 due to elevated development and welfare-related spending during the Covid-19 pandemic. To cover the fiscal deficit in 2024–25, gross market borrowings are expected to reach Rs 14.13 lakh crore, a decrease from the estimated Rs 15.4 lakh crore in the current fiscal. The net borrowing for FY25 is projected at Rs 11.75 lakh crore.
According to Ranen Banerjee, Partner and Leader Economic Advisory, PwC India, "The Government has walked the path of fiscal prudence, and it is heartening to note that the fiscal deficit target for FY24, pegged at 5.8%, will be overachieved. The fiscal deficit being pegged at 5.1% for FY25 is a positive move as it will help free up space for private borrowings as they pick pace during the year, besides helping in containing inflationary pressures and supporting the bond markets. "