In the first quarter of FY25, the central government has shown commendable fiscal management by significantly reducing its fiscal deficit to just Rs. 1.4 lakh crores, representing 8.1% of the budget estimate. This marks a remarkable improvement compared to the previous year's performance, where they had achieved 25.3% of the target. The growth in revenue receipts, amounting to Rs. 8.3 lakh crores with a 41% year-on-year increase, has played a pivotal role in this fiscal accomplishment, although government spending momentum has experienced a deceleration.
Economist Aditi Gupta from the Bank of Baroda explains that the sharp decline in fiscal deficit can be attributed to subdued capital expenditure during the general elections, coupled with a surge in receipts driven by a substantial increase in income tax collections. With the elections concluded, Gupta anticipates a reinvigoration of capital expenditure moving forward. She expects the government to meet its revised fiscal deficit target of 4.9% of GDP in FY25 through prudent expenditure management and robust tax collections.
In terms of revenue performance, the central government's revenue receipts in Q1 FY25 amounted to Rs. 8.3 lakh crores, reflecting a 41% increase from the same period last year. The gross tax revenue witnessed a notable 23.7% year-on-year rise, primarily fueled by a significant increase in direct taxes. Direct tax revenue grew by 39.9%, with income tax collections soaring by 49.9% and corporate tax collections rising by 26.2%. Indirect tax collections also saw an increase, with GST collections rising by 10.6%, although customs and union excise duties experienced a decline.