India to Allocate $48 Billion for Food and Fertilizer Subsidies in 2024 Budget
May 19, 2024India is expected to allocate approximately 4 trillion rupees ($48 billion) for food and fertilizer subsidies in the upcoming fiscal year, as the nation prepares for the 2024 Lok Sabha elections. This move, indicating fiscal caution, was reported by two government sources to Reuters.
For the current fiscal year, ending on March 31, India’s total budget spending stands at 45 trillion rupees, with subsidies on food and fertilizer accounting for nearly one-ninth of this amount.
The Ministry of Consumer Affairs, Food and Public Distribution has projected that food subsidies will cost 2.2 trillion rupees ($26.52 billion) in the next fiscal year, marking a 10% increase over the estimated spending for the current fiscal year of nearly 2 trillion rupees ($24.11 billion).
Meanwhile, the fertilizer subsidy for the next fiscal year is expected to be 1.75 trillion rupees ($21.10 billion), slightly less than the current year’s estimate of nearly 2 trillion rupees. This information was provided by one of the sources on the condition of anonymity.
Union Finance Minister Nirmala Sitharaman is scheduled to present the interim budget for 2024-25 on February 1. With Prime Minister Narendra Modi anticipated to secure a third term in the April and May elections, maintaining the current level of subsidies is considered unusual for a government facing a national election in a few months.
Containing food and fertilizer subsidies is essential for managing India’s fiscal deficit, which the Modi government aims to keep at 5.9% of the gross domestic product this year, with plans to reduce it by at least 50 basis points in the 2024-25 fiscal year.
The cost of food subsidies is likely to rise next year due to the Modi administration’s extension of the popular free food welfare program for an additional five years. This program, the world’s largest of its kind, involves purchasing rice and wheat from millions of domestic farmers at state-set minimum or guaranteed prices and then distributing these staples for free to 800 million Indians.
