India is considering earmarking about 4 trillion rupees ($48 billion) for food and fertilizer subsidies in the next fiscal year, as indicated by two government sources quoted by Reuters. This move reflects fiscal caution ahead of the 2024 Lok Sabha elections.
In the ongoing fiscal year ending on March 31, India’s overall budget expenditure amounts to 45 trillion rupees, with roughly one-ninth originating from food and fertilizer subsidies.
The Ministry of Consumer Affairs, Food, and Public Distribution has indicated that the anticipated expenditure on food subsidies for 2019 is projected to reach 2.2 trillion rupees ($26.52 billion). This marks a 10% rise compared to the estimated spending of nearly 2 trillion rupees ($24.11 billion) in the ongoing fiscal year, 2023–24.
Furthermore, it is expected that the fertilizer subsidy for the forthcoming fiscal year will amount to 1.75 trillion rupees ($21.10 billion), as disclosed by an anonymous source. This figure is lower than the current projection of nearly 2 trillion rupees for the fiscal year 2022–2023.
Union Finance Minister Nirmala Sitharaman is set to unveil the interim budget for the fiscal year 2024-25 on February 1.
Anticipated to secure an unprecedented third term in the April and May elections, Prime Minister Narendra Modi would be faced with an unusual situation if the government maintains the current level of combined subsidies, especially considering the proximity of the national election.
Additionally, it is vital to control food and fertilizer subsidies as it plays a crucial role in managing India’s fiscal deficit. Modi’s government aims to keep the fiscal deficit at 5.9% of the gross domestic product this year and plans to reduce it by at least 50 basis points in the fiscal year 2024-25.
Given the Modi administration’s decision to extend its widely popular free food welfare program for an additional five years late last year, the cost of food subsidies is expected to increase in the upcoming year.
India runs the world’s most extensive food welfare program, a multi-billion dollar initiative that involves purchasing rice and wheat from millions of domestic farmers at state-set minimum or guaranteed prices. The acquired staples are then distributed free of charge to 800 million Indians, making it the largest such initiative globally.
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