New Delhi, India – A government source has emphasized the commitment to the established glide path for reducing fiscal deficit, asserting that there are no compelling reasons for deviation.

Currently, the central government is aiming to achieve a fiscal deficit of 5.9 percent of GDP for the current fiscal year. However, adhering to the predefined trajectory, the government plans to decrease the fiscal deficit to below 4.5 percent of GDP by the fiscal year 2025-26.

The government official noted that based on existing data, revenues and expenditures are aligning with predictions, expressing confidence in meeting the fiscal deficit target for 2023-24. Notably, the source wished to remain anonymous due to media communication restrictions.

As per the latest available data, the government’s fiscal deficit reached Rs 6.43 lakh crore in April-August, accounting for 36.0 percent of the annual target. Furthermore, August witnessed a substantial increase in corporate tax collections, totaling Rs 62,817 crore, while personal income tax collections more than quadrupled to Rs 1.03 lakh crore.

In the April-August period, the central government’s capital expenditure reached Rs 3.74 lakh crore, marking a year-on-year growth of 48 percent, with the figure now exceeding Rs 5 lakh crore according to the official quoted above.

Bond yield concerns have emerged in light of the recent surge in government bond yields due to statements from the Reserve Bank of India (RBI) regarding open market sales of securities to manage liquidity. The benchmark 10-year government bond closed at 7.38 percent on October 23, up 20 basis points in the past month.

The source acknowledged the unpredictability in the bond market but expressed caution about unexplained spikes in bond yields. The government remains attentive to any developments and stands ready to take remedial actions if yields breach specified tolerance levels, although the official did not elaborate on the government’s tolerance threshold.

Regarding financing the fiscal deficit, the official cited satisfaction with the small savings collections, highlighting the Senior Citizen Savings Scheme’s substantial year-on-year increase of 160 percent, with collections amounting to Rs 74,675 crore in the first half of 2023-24.

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