The government is focusing on improving the quality of public spending, strengthening the social safety net and reducing the fiscal deficit to 4.5 percent of GDP by FY26, according to a finance ministry report.

Finance Minister Nirmala Sitharaman will present the budget for the financial year 2025-2026 in Parliament on February 1.

The Union Government remains committed to the fiscal consolidation path outlined in the FY 2021-22 budget, with the aim of reducing the fiscal deficit below 4.5 percent of GDP for the fiscal year fiscal year 2025-26, according to the statements of the Ministry of Finance on the semi-annual review of revenue and expenditure trends and the deviation in the fulfillment of the government’s obligations under the Fiscal Responsibility and Management Act budget, 2003.

This review also looked into any deviations from the Fiscal Responsibility and Budget Management Act, 2003. The statements were tabled in the Lok Sabha last week.

The report highlights that it will focus on improving the quality of public spending while strengthening the social security system for vulnerable groups. This approach is expected to improve the country’s macroeconomic fundamentals and maintain overall financial stability.

The statements note that the 2024-2025 budget was formulated amid global uncertainties, including ongoing conflicts in Europe and the Middle East. However, India’s strong macroeconomic fundamentals have shielded the country from global economic turbulence, allowing it to continue to pursue growth while maintaining fiscal discipline.

“It has also helped the nation pursue growth with fiscal consolidation. As a result, India maintains its pride of place as one of the fastest growing economies in the world. However, the risks to growth still remain,” he said.

The total estimated expenditure for the fiscal year 2024-25 is around Rs 48.21 crore, with Rs 37.09 crore earmarked for revenue and Rs 11.11 crore for capital expenditure, according to the budget estimate (BE). In the first half of FY25, the government spent Rs 21.11 billion, about 43.8 percent of BE.

Including grants for creation of capital assets, the effective capital expenditure (capex) was projected at Rs 15.02 crore. Gross tax revenue (GTR) was estimated at Rs 38.40 lakh crore, resulting in a tax to GDP ratio of 11.8 percent.

The total non-debt revenue of the Center was estimated at Rs 32.07 crore, consisting of net tax revenue of Rs 25.83 crore, Rs 5.46 crore in non-tax revenue and Rs 0.78 crore in miscellaneous capital income.

Based on these estimates, the fiscal deficit for the fiscal year 2024-25 was projected at Rs 16.13 crore, or 4.9 percent of GDP. For the first half of FY25, the fiscal deficit was estimated at Rs 4.75 trillion, or about 29.4% of the full-year estimate.

The fiscal deficit is expected to be financed by Rs 11.13 crore raised from the market (government securities and Treasury bills) and the remaining Rs 5 crore through other sources such as the National Small Savings Fund ( NSSF), the State Provident Fund, the outside. debt and the disposition of cash balances.