India’s Fiscal Deficit Drops to Rs 1.4 Trillion in April-June 2024
India’s fiscal deficit reduced to Rs 1.4 trillion during April-June 2024, down from Rs 4.5 trillion reported in the same period last year, according to a report by Anand Rathi Equity, a financial services company. The report attributes this reduction to a record dividend paid to the government by the Reserve Bank of India (RBI) and robust tax collections.
“India’s fiscal deficit during Apr-Jun’24 (FY25) was Rs.1.4 trn, significantly lower than the Rs.4.5 trn reported in the corresponding period last year due to record RBI dividend and robust tax collections,” said the report.
The report also highlighted the strong growth in tax collections, noting that direct tax collections in June 2024 surged by 61.5 per cent year-over-year, driven by strong corporate tax collections due to advance tax payments. Personal income tax collections posted a 66 per cent year-over-year growth in June 2024.
However, expenditures have yet to recover. Total expenditure declined by 18 per cent year-over-year in June 2024, following a 38 per cent year-over-year decline in May 2024, primarily due to a significant slowdown in capital expenditure. On a fiscal year-to-date basis, total expenditures were down 7.7 per cent, with capital expenditure down 35 per cent year-over-year.
The report also noted that the FY25 fiscal deficit target appears reasonable. The deficit for FY25 has been revised down to 4.9 per cent of GDP, compared to the interim budget target of 5.1 per cent of GDP.
“The record dividend payment by the RBI has rendered the fiscal position comfortable. Despite expectations of freebies, the government appeared to have maintained fiscal prudence in the budget. While revenue expenditure was raised by Rs 0.55 trn in the full budget compared to the interim budget, the government brought down the deficit projection due to favourable revenue conditions,” the report added.
The report also highlighted that while major subsidies on food, fertilizers, and petroleum have been maintained at the same levels as in the interim budget, a modest rise is expected in interest and other subsidies.
Doubts Revealed
Fiscal Deficit -: A fiscal deficit happens when a country’s government spends more money than it earns. It’s like when you spend more pocket money than you get from your parents.
Rs 1.4 Trillion -: Rs 1.4 trillion is a very large amount of money. One trillion is a number with 12 zeros after it, so Rs 1.4 trillion is 1,400,000,000,000 rupees.
April-June 2024 -: This refers to the first three months of the financial year 2024, which are April, May, and June.
Reserve Bank of India -: The Reserve Bank of India (RBI) is the central bank of India. It manages the country’s money and financial system, like how a principal manages a school.
Dividend -: A dividend is a sum of money paid regularly by a company to its shareholders out of its profits. In this case, the RBI paid a large amount of money to the government.
Direct Tax Collections -: Direct taxes are taxes that people and companies pay directly to the government, like income tax.
Personal Income Tax -: Personal income tax is the tax that people pay on the money they earn from their jobs or businesses.
Year-over-year -: Year-over-year means comparing data from one year to the same period in the previous year. For example, comparing June 2024 to June 2023.
GDP -: GDP stands for Gross Domestic Product. It is the total value of all goods and services produced in a country in a year. It’s like adding up the value of everything made in India in one year.
