Page 55 - Banking Finance December 2024

ARTICLE

India's Fiscal

Discipline: A Path to

Economic Stability

and Growth Brijesh Kumar Shukla

Chief Manager (Faculty)
Union Bank Of India
Union Learning Academy -
Hyderabad

In a significant economic development, the fiscal deficit for the financial year 2023-2024 (FY24)
has been recorded at 5.6% of GDP, falling below the government's revised estimate. This unexpected
positive outcome highlights effective fiscal management and a recovering economy, offering a ray
of optimism amidst global economic uncertainties.

I n a significant economic development, the fiscal deficit On the expenditure side, the government managed to
contain spending without compromising on critical sectors
for the financial year 2023-2024 (FY24) has been
recorded at 5.6% of GDP, falling below the
government's revised estimate. This unexpected positive such as health, education, and infrastructure. Notably, there
was efficient allocation and utilization of funds, ensuring that
outcome highlights effective fiscal management and a priority areas received adequate support while avoiding
recovering economy, offering a ray of optimism amidst global unnecessary expenditures.
economic uncertainties.
Potential for Further Deficit Reduction
It is a welcome surprise as the government's revised
estimate had projected the fiscal deficit at a higher A significant factor that could further improve India's fiscal
percentage, reflecting concerns over various economic position is the substantial dividend received from the
challenges, including global inflationary pressures, rising Reserve Bank of India (RBI). The government is currently
interest rates, and geopolitical tensions. However, the final sitting on a Rs 2.1 trillion dividend from the RBI, which
figure of 5.6% signals better-than-expected revenue provides additional fiscal space. This windfall potentially
collections and disciplined expenditure management. allows the government to further reduce the fiscal deficit,
possibly even below the already optimistic target of 5.1%
Revenue and Expenditure Dynamics for the coming fiscal year.
Revenue collection played a pivotal role in narrowing the
fiscal deficit. The GST, which had previously been a concern The availability of these funds could be strategically utilized
due to fluctuating monthly collections, showed consistent to support critical infrastructure projects, bolster social
improvement. Direct taxes also saw a notable increase, welfare programs, or reduce public debt. Such flexibility is
driven by higher corporate earnings and better individual invaluable in managing the economy amidst external
tax compliance. uncertainties and ensuring continued growth and stability.

BANKING FINANCE | DECEMBER | 2024 | 49