Government finances indicate improvement, interest payments decline

The RBI stated in a latest update that the total expenditure of the union government registered a growth of 4.8 per cent in 2024-25 (PA) over 2023-24. As per cent of GDP, while revenue expenditure declined in 2024-25 (PA) vis-?-vis RE, capital expenditure remained broadly unchanged. The growth in interest payments moderated, while that of subsidy outgo saw a contraction during 2024-25 (PA) in line with RE.

Furthermore, the ratio of revenue expenditure to capital outlay (RECO) declined to 4.2, lower than RE (from 4.4 in 2023-24), which bodes well for the quality of public expenditure. Central government finances for April 2025 indicated an improvement in GFD and RD ? both in absolute terms and as per cent of BE ? vis-?-vis the corresponding period of the previous year, aided by substantial growth in non-tax revenue, and non-debt capital receipts (including disinvestment receipts). While revenue expenditure recorded a contraction due to a decline in interest payments, capital outlay grew by 20.9 per cent. Consolidated state government finances for 2024-25 witnessed some deterioration.

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