India’s Deficit Dilemma: Rs 9.82 Lakh Crore and Counting Combines 55% of FY24 Target in First 9 Months

On January 31st, the Controller General of Accounts presented a report in which they said that India had reached 55% of its FY24, and this caused an “alert” in the nation. All this happened the day before Finance Minister Nirmala Sitharaman presented the budget for 2024–25 in Parliament.

The data showed that the financial deficit of the government grew during April–December as compared to the same period last year. This value accounts for a large portion of the target as a whole.

In December alone, there was a substantial increase in the fiscal deficit five or more times relative to December 2022. However, throughout April–December 2023, on a year-on-year basis, the economic deficit declined. According to specialists, ahead of vital elections, the government is spending profusely and trying to win people by bringing down petrol prices and other essentials.

During December, there was an enormous expansion in the fiscal deficit, essentially driven by significant growth in capital expenditure, making it huge for the whole year. After a recent decline, this expansionary capital outlay is promising, such that economists hint that the Centre may fall short of its record target for 2023–24.

During April–December, the Centre spent an adequate amount of money, accounting for some beautiful percentages against its annual goal and growth compared with the first nine months of 2022–23.

On a positive note, total revenue decreased in December, with internet tax sales being lower. However, despite the increase in gross taxes due to rising corporate tax receipts and rising individual income tax receipts, the government’s net revenue also went down in December.

A financial deficit arises when a government’s overall expenses are greater than revenues, except for borrowed funds. In essence, it constitutes the gap between what the government spends and what it receives from taxes and other sources, such as sales.

The huge financial deficit indicates overborrowing payments and high inflation in America, which forces the government to print more money to cover up this shortfall.