The Indian government is gearing up for the Interim Budget 2024, and all eyes are on the allocation of major subsidies such as food, fuel, and fertilizers. According to estimates by ICRA, the outlay for major subsidies is expected to be Rs 3.9 trillion in the fiscal year 2025, which is 6 per cent lower than the expected Rs 4.2 trillion for the current fiscal year. This estimate also overshoots the budget estimate of Rs. 3.7 trillion. One of the reasons for the increase in the food subsidy bill is the government’s decision to extend free food grain distribution to people under the National Food Security Act for the next five years. As a result, the food subsidy bill is expected to be upwards of Rs 2.0 trillion for the fiscal year 2025.
In addition to the food subsidy, the government also incurs a significant expense on fuel and fertilizers subsidies. ICRA estimates the fuel subsidy requirement to be pegged at Rs 116 billion, and the combined subsidy requirement for fertilizers is expected to be Rs 1.4-1.5 trillion for the fiscal year 2025. However, experts suggest that the government may not allocate the full amount of expected subsidy requirement at the outset in the Budget Estimate for the next fiscal year and may calibrate the subsidy during the year, as seen in previous fiscals.
The allocation and management of subsidies by the government has attracted mixed opinions from analysts and experts. While some argue that the government’s decision to extend free food grain distribution is a positive step towards ensuring food security for the people, others are concerned about the increasing burden on the government’s finances. There are also discussions about the need for the government to carefully manage the subsidy allocation and ensure that it is done in a way that maximizes its impact on the intended beneficiaries without compromising fiscal stability. As the Interim Budget 2024 approaches, the government’s approach towards subsidy allocation will continue to be a topic of interest and scrutiny.