India’s fiscal deficit stood at Rs 4.4 lakh crore, or 27 per cent of the annual estimate, in the April-August period in the current fiscal (FY25), from Rs 6.4 lakh crore in the same period last year, the government announced on Monday.

The fiscal deficit narrowed from 36 per cent reported during the same period last year.

As per government data, total receipts stood at Rs 12.17 lakh crore in the April-August period, while overall expenditure was Rs 16.52 lakh crore, or about 34 per cent of the annual goal, lower than the Rs 16.72 lakh crore in the same period last year.

In the reporting period, the Reserve Bank of India (RBI) announced a transfer of Rs 2.11 lakh crore as a surplus to the government. Also, the revenue deficit was at Rs 1.43 lakh crore or 24.7 per cent of the fiscal year's budget target.

In April-August FY25, the net tax revenues rose by 8.7 per cent YoY, non-tax revenues expanded by 59.6 per cent, boosted by the RBI dividend, and revenue expenditure grew by 4.1 per cent, while capex contracted by 19.5 per cent.

According to Aditi Nayar, Chief Economist and Head-Research and Outreach, ICRA, given the trends in capex during April-August 2024, the government needs to incur a capex of Rs 1.2 lakh crore per month during the last seven months of the fiscal, which portends an ambitious expansion of 41 per cent relative to the same period of FY2023.

While corporate tax collections have been tepid, income tax collections have expanded by a robust 26 per cent during this period, although these trends appear to have been partly distorted by the timing of refunds. "The income tax collections may surpass the FY2025 RBE of Rs. 11.5 trillion, unless large refunds are released in the latter part of the fiscal, while corporation tax inflows may print in line or slightly lower than the target," said Nayar. In the Union Budget, Finance Minister Nirmala Sitharaman had revised the fiscal gap target to 4.9 per cent, while pegging the fiscal deficit target at 5.1 per cent for the next fiscal year.