The data bolsters chances of the government meeting its fiscal deficit target of 4.8% of gross domestic product (GDP) in 2024-25, despite low disinvestment proceeds and the recently approved supplementary demands for grants, analysts said.
Some, however, said the fiscal deficit could fall below 4.8%, aided by higher-than-expected nominal GDP.
In absolute terms, the fiscal deficit stood at ₹13.47 lakh crore until February in this fiscal, down 10.3% from a year earlier.
The deficit in February alone moderated 55.5% year-on-year to ₹ 1.77 lakh crore.
Capital expenditure contracted 35.4% last month from a year before to ₹54,528 crore, dragging down the growth until February this fiscal to a six-year low of 0.8%, against the curtailed annual target of a 7.3% increase.
Analysts expect the capex, which touched ₹8.12 lakh crore until February, to fall short of the revised 2024-25 goal of ₹10.18 lakh crore, making it easier for the government to control the fiscal deficit.
Capex was hit earlier in this fiscal owing to election-induced uncertainties in project execution.
Meanwhile, revenue spending declined 12.8% year-on-year in February to ₹2.69 lakh crore.
Between April 2024 and February this year, revenue spending increased 4.7% year-on-year to ₹30.81 lakh crore, having fallen short of the full-year target of a 5.8% increase.
ICRA chief economist Aditi Nayar said the government’s capex needs to expand by about 44% year-on-year in March to meet the revised estimate for 2024-25, which she said “appears to be a tall ask”.
Nayar expects the fiscal deficit to be largely in line with the revised estimate (in absolute terms) of ₹15.7 lakh crore. If the National Statistical Office’s upward revision of 2024-25 nominal growth projection last month holds true, the fiscal deficit will be contained at 4.7% of GDP, she added.
The government’s net tax revenue increased 9% until February, against the full-year target of 9.9%, as per the latest data. This implies a required growth of 13% in March to meet the revised annual target, which “seems achievable given the modest uptick in tax devolution in the month”, Nayar said.
However, riding the record central bank dividend, non-tax revenue surged 36.9%, against the annual goal of 32.2%.
