Fiscal deficit till January widens to 74.5% of revised target

The central government's fiscal deficit up to January this financial year hit 74.5% of the revised annual target, compared with 63.6% a year before, showed the official data released on Friday.

A spike in capital expenditure and a double tranche of devolution to states in January caused the fiscal gap to widen from a year earlier, analysts said.

But the deficit would still be contained within the target of 4.8% of gross domestic product (GDP) in FY25, they reckoned.


While the advancing of resource transfer to states hit the Centre's net tax revenue in January, it would proportionately ease its devolution in the last two months of the year, they said.

The Centre has released 83.5% of the FY25 devolution to states in 10 months, the highest proportion since FY01, according to India Ratings' Paras Jasrai.

In absolute terms, the fiscal deficit stood at ₹11.70 lakh crore until January this fiscal, compared with ₹11.03 lakh crore a year earlier.

The deficit in January alone more than doubled to ₹2.55 lakh crore from ₹1.20 lakh crore a year before.

Revenue spending rose 5.1% on year in January to ₹2.66 lakh crore. But capital expenditure jumped 51% to ₹72,022 crore, marking a third straight month of increase after a marked election-induced slowdown earlier this fiscal.

Between April and January, revenue spending rose 6.8% on-year to ₹28.13 lakh crore, having moved faster than the full-year target of a 5.8% increase.

Capex, however, inched up by 5% in these ten months to ₹7.57 lakh crore, against the annual target of 7.3%. Overall, spending grew 6.4% until January, against the FY25 target of 6.1%.

"With a sharp year-on-year decline in the tax devolution remaining to be released in February-March 2025, we do not expect a miss in the net tax revenue collections relative to the FY2025 RE," ICRA chief economist Aditi Nayar said.