Indi Deficit Dilemma: A Closer Look at the 2024 Budgetary Balancing Act

Navigating the Fiscal Frontier: Evaluating the Year Deficit Dynamics Amidst February SurgeIn the fiscal chronicles of the current year, the prospect of meeting the stipulated deficit goal appears tenable, notwithstanding an unforeseen uptick as February waned.

The chasm delineating the Union Government fiscal inflows and outflows has experienced a pronounced dilation, escalating from the vicinity of ₹11 trillion by January conclusion to ₹15 trillion as February folded. This surge propelled the deficit from 63.6% of the recalibrated benchmark of ₹17.3 trillion to an elevated plateau of 86.5% within a mere 29-day interlude. Such volatility starkly contrasts the preceding fiscal trajectory, where the deficit objective was pegged at ₹17.55 trillion for 2022-23. By January of that year, the shortfall was recorded at 67.6% of the target, incrementing to 82.6% by February, marking a rise of ₹2.3 trillion. The fiscal year concluded with a gap of ₹17.33 trillion, mirroring
this year aim. The surge observed in February owes its genesis to a duo of contributory elements. Initially, the Centre disbursement to States, via two tranches of their tax devolution share, amounted to approximately ₹2.15 trillion, a noticeable augmentation from the preceding year ₹1.4 trillion.
Moreover, capital expenditure, having dwindled to ₹47,600 crore in January, witnessed a significant amplification to ₹84,400 crore, quadrupling the outlay of February 2023. To attain the government ambitious capital expenditure target of ₹10 trillion, March necessitates an escalation to ₹1.4 trillion.
Nonetheless, the enforcement of the Model Code of Conduct for the impending Lok Sabha elections, midway through March, may moderate this anticipation slightly.

From a GDP perspective, the previous fiscal deficit was pegged at 6.4%, with the initial target for the current year set at 5.9%. Finance Minister Nirmala Sitharaman, in a strategic revision during the interim Budget, moderated this to 5.8%. The government blueprint envisions a contraction of this gap to 4.5% of GDP by the 2025-26 fiscal year, setting a 5.1% marker for 2024-25. This trajectory, however, might necessitate recalibration in the forthcoming full Budget post-general election, contingent on the prioritization of the succeeding administration and the economic climate through the ensuing quarters.
In the wake of the COVID-19 pandemic, the Centre strategy has been to catalyze growth via public capital expenditure, with an aspiration for private investment to subsequently take precedence. Yet, this transition is beleaguered by high inflation, the specter of an adverse monsoon, and disparate consumer demand.

On the expenditure ledger, the government retained a budgetary leeway of ₹6 trillion for March. Notably, three pivotal ministries focused on public welfare — Agriculture, Rural Development, and Consumer Affairs — still had access to over ₹1.03 trillion for the fiscal final month, despite adjustments in their allocations in February. It conceivable that certain departments may fall short of their expenditure targets, potentially resulting in an unexpectedly favorable deficit figure for the year. While fiscal prudence is laudable for macroeconomic vitality, the recurrent shortfall in achieving expenditure objectives not only undermines the intended impact but also suggests that there exists a margin to
refine budgetary allocations and curtail future borrowing.