India Allocates $48 Billion for Food and Fertilizer Subsidies in the Upcoming Year
Indian Government's Strategic Move Reveals Fiscal Caution in Anticipation of General Elections 2024
India plans to put around 4 trillion rupees (equivalent to $48 billion) towards food and fertilizer subsidies for the next year. This allocation makes up about one-ninth of the total budget spending this fiscal year, which will finish on March 31, and adds up to 45 trillion rupees.
Sources from the Ministry of Consumer Affairs, Food, and Public Distribution have estimated that the food subsidy bill for the next fiscal year will be 2.2 trillion rupees (approximately $26.52 billion), which is 10% more than the projected spending of nearly 2 trillion rupees (around $24.11 billion) for the current fiscal year. Additionally, it is expected that the fertilizer subsidy for the next fiscal year will be 1.75 trillion rupees (about $21.10 billion), a decrease from the estimate of nearly 2 trillion rupees for the current fiscal year.
While maintaining subsidies at their existing level might seem unusual for a government approaching national elections, Prime Minister Narendra Modi's anticipated win in the upcoming polls scheduled for April and May could influence this decision. Managing India's fiscal deficit is crucial, with the government aiming for a fiscal deficit of 5.9% of GDP this year and planning to reduce it by at least 50 basis points in the fiscal year 2024/25.
The food subsidy bill is likely to increase next year due to the Modi administration extending its flagship free food welfare program late last year for the next five years. This program, the world's largest of its kind, involves purchasing rice and wheat from domestic farmers at state-set prices and distributing these staples for free to 800 million Indians.
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