Fiscal Deficit Target Of 5.1% Ambitious But Achievable: Finance Secretary

Finance Secretary T V Somanathan has said the government's resolve to bring down the fiscal deficit by 70 basis points to 5.1% in 2024-25 is ambitious but achievable in view of the tax buoyancy and expenditure management.

Finance Minister Nirmala Sitharaman in the interim Budget presented on Thursday refrained from announcing any populist measures but significantly trimmed the fiscal deficit to 5.1% of the Gross Domestic Product next fiscal and 4.5% in FY26.

"So it is ambitious but it is also realistic. There are three pillars on which this is based. One is we have assumed growth in tax revenue about 11.5%. I think that's a very realistic assumption," Somanathan told PTI Videos in an interview.

Besides, he said, the government has projected a slight increase in non-tax revenue from a high base during the current financial year.

On the expenditure side, he said, "Capex has increased 11.1%... the revenue expenditure we believe is realistically projected. We have been helped by the fact that some of our subsidies have not grown and whether it is food or fertiliser. Both of them are either stagnant or slightly declined. Fertilizer is assisted by decline in commodity prices globally."

The government has projected the fertiliser subsidy of Rs 1.64 lakh crore for the next financial year as against Rs 1.88 lakh crore allocated for the current fiscal. Similarly, food subsidy outgo will come down to Rs 2.05 lakh crore compared to Rs 2.12 lakh crore for the current fiscal.

"On the basis of three parts, reasonable revenue growth and reasonable increase in non-tax revenue that is tight control over avoidable expenditure and an optimal balanced increase in capital expenditure we are quite confident that we will achieve this (fiscal deficit target of 5.1% of GDP)," he said.

In absolute terms, the fiscal deficit would be Rs 16,85,494 crore against Rs 17,34,773 crore for the current fiscal.

For the Budget calculation purposes, the government projected nominal GDP growth of 10.5% for the next financial year against the 11% estimated for the current fiscal.

The nominal GDP for BE 2024-25 has been projected at Rs 3,27,71,808 crore, assuming 10.5% growth over the estimated nominal GDP of Rs 2,96,57,745 crore, as per the First Advance Estimates of FY24.

To meet the fiscal deficit, the gap between revenue receipt and expenditure, the government raises funds by issuing bonds in the market.

The gross and net market borrowings through dated securities during 2024-25 are estimated at Rs 14.13 lakh and Rs 11.75 lakh crore, respectively.

Dismissing criticism on capital expenditure (capex), Somanathan said, "There is an increase of 11.1% over a very high base. So this is an increase of more than Rs 1 lakh crore... Earlier, we had a small base but now we have a large base so it can only be a small increment."

Capital expenditure of Rs 11.11 lakh crore cannot be done by signing a cheque, he said, adding that it requires action on the ground because there are issues of permission, land acquisition, and construction.

"So it is a very realistic and balanced provision, which is what the economy needs right now," he said.