- The centre’s fiscal run-rate for first six months of FY25 is on track to meet consolidation goals.
- After a delayed start due to elections, capex spending is playing catch-up.
- Direct tax growth is in double-digits, but the pace has moderated from last year.
- FY25 deficit might improve vs target as capex allocation might be under spent.
This is a summary of the flash note, please read the PDF for the entire report.
Fiscal run-rate
The Final Budget for FY25 tabled in July 2024 saw the central government deliver on the optimistic end of budget expectations, with the FY25 fiscal deficit set at 4.9% of GDP, 20bp better than the interim numbers (India Budget: Consolidation without expenditure compromise). We take stock of the FY25 run-rate, mid-way through the fiscal year.
Outlook
Post the pandemic, the central government has returned to its consolidation path, lowering the fiscal deficit from -9.2% of GDP in FY21 to -4.9% of GDP in FY25. Plans are to lower this metric to -4.5% of GDP in FY26, in effect halving the ratio in over four years. There will be a two-pronged focus in second half of the year.
High-frequency indicators points to softer economic momentum.
The economy’s cyclical trend is softening at the margin, as captured by our GDP Nowcast model. We track domestic demand consumption, industrial activity and trade using propriety indices.
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