Context

• The fiscal deficit of the central government was less than the revised estimate due to higher tax receipts than expected in FY 2024.
• The revised estimate had said that the fiscal deficit would be 5.8 per cent of the gross domestic product (GDP), but the figure was 5.6 per cent of GDP.

Key Points

• According to government data, there was a difference of Rs 16.54 lakh crore between the revenue and expenditure of the Center, while in the budget this difference was estimated to be Rs 17.86 lakh crore.
• The initial estimate of fiscal deficit for the last financial year was 5.9 percent of GDP, which was reduced to 5.8 per cent in the interim budget.
• It is worth noting that when the government spends more than the income, the treasury suffers a deficit i.e. fiscal deficit.
• According to the data, net tax receipts in FY 2024 were Rs 23.27 lakh crore, which was more than the estimate. During this period, the total expenditure of the government was Rs 44.43 lakh crore, which is 99 percent of the budget amount.
• Meanwhile, due to unexpected revenue expenditure in April, there was a fiscal deficit of Rs 2.1 lakh crore, which is 12.5 percent of the full year target.
• It is worth noting that the central government has set a target of containing the fiscal deficit to 5.1 percent of GDP or Rs 16.85 lakh crore in the financial year 2025.

Fiscal Deficit

• Fiscal deficit refers to the shortfall in a government's revenue compared to its expenditure.
• When a government's expenditure exceeds its revenue, the government will have to borrow money or sell assets to meet the deficit.
• On the other hand, when a government has a fiscal surplus, its income exceeds its expenditure.
• However, governments do not often run in surplus.
• Most governments prefer controlling fiscal deficit rather than creating fiscal surplus or balancing the budget.

Important Facts For Exam 

Laws for Fiscal Management in India

Fiscal Responsibility and Budget Management Act 2003

• This Act defines how to maintain a balance between government revenue and government expenditure.
• Its main objective is to maintain proper transparency in the financial operations of the government.
• Implemented - July 2004