Of the Government Fiscal Deficit There has been a decrease during this financial year (April-November 2024). Fiscal deficit target for financial year 2024-25 (FY25) 4.9% was determined, and current data shows expectations of staying within this target. However, during this period the government Capital Expenditure A decline has also been recorded, due to which questions are being raised about its impact on the economy.
Fiscal deficit and capital expenditure situation
- During April-November Fiscal Deficit:
- It stood at ₹8.5 lakh crore, which is almost the target of ₹16.13 lakh crore for the entire financial year. 50% Is.
- Decline in capital expenditure:
- ₹5.1 lakh crore, compared to last year 12% less Is.
- Chances of reaching the capex target of ₹11.11 lakh crore set for FY25 are slim.
- Total expenditure of the government:
- Only 3.3% increase to ₹27.4 lakh crore which is the slowest growth in the last decade.
Capital expenditure may be 20% less than the target
Motilal Oswal Financial Services According to, capital expenditure in FY25 will be below the target 20.2% less Expected to stay.
- Effect of election year:
- There is usually a reduction in government expenditure at the time of Lok Sabha elections.
- However, this current spending cut has come at a time when the economy needs to grow rapidly.
Reduction in capital expenditure and impact on the economy.
- Impact on GDP growth:
- GDP growth to decline in second quarter of FY25 5.4% Remained, which is the lowest in the last 7 quarters.
- Economists believe that the reduction in government capital expenditure could be the main reason for this.
- Impact on consumption:
- Cutting capital spending could slow down the process of infrastructure creation and job creation.
- Reduction in consumption may affect economic growth.
Economists’ advice: Emphasis on increasing consumption
In a meeting with Prime Minister Narendra Modi on December 24, economists suggested measures to increase consumption.
- CII (Confederation of Indian Industry):
- Advised to reduce the tax burden on people with annual income up to ₹ 20 lakh.
- Suggested giving incentives to increase consumption.
- Other suggestions:
- Need to increase spending on infrastructure and rural development.
- Measures to provide relief to small and medium industries.
Is reduction in capital expenditure good for the economy?
Advantages:
- Fiscal deficit remains controlled, which strengthens the financial position of the government.
- Inflation can be controlled.
Loss:
- Cuts in capital spending could have a negative impact on infrastructure development and employment.
- This may lead to reduction in consumption and demand, which may slow down GDP growth.
