Food and fertilizer subsidies alone account for around one-eighth of India’s total budget outlay of Rs 39.45 lakh crore this financial year, but food subsidy cuts in particular could prove politically sensitive with an election to come. loom on the horizon.
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The government plans to budget around Rs 2.3 lakh crore for food subsidies in the coming financial year, compared to Rs 2.7 lakh crore for the current year till March 31, the two officials said.
Spending on fertilizer subsidies is likely to fall to around Rs 1.4 lakh crore, according to one of the officials and a third government official. This compares to nearly Rs 2.3 lakh crore this year, the third official added.
Officials declined to be named because the information was not public.
The finance ministry declined to comment, while the food and fertilizer ministries did not immediately respond to requests for comment.
Much of the savings will come from ending a COVID 19-era free food program and replacing it with a lower-spending program, the first two officials said. This will halve the free rations available to the poor within a year with a round of national elections, while general elections loom in 2024.
The government is eager to bring its budget deficit under control, which is targeting 6.4% of GDP for the current fiscal year.
That’s well above the 4% to 4.5% average over the past decade, excluding the pandemic years when spending jumped and the ratio peaked at 9.3%.
The government plans to cut the ratio by at least half a point in 2023/24, the first two officials said.
The subsidy figures will be announced on February 1, when Finance Minister Nirmala Sitharaman presents the Union budget for FY24 in Parliament.
The three officials said the latest subsidy estimates for 2023/24 could be adjusted in a final round of talks, by mid-January.
The reduction in fertilizer subsidies is also driven by expectations of lower crude oil prices and the government’s revised gas supply policy for fertilizer companies, which came into effect earlier this month. said two of the officials.
($1 = 82.8775 Indian rupees)
