India may earmark $48B for next year’s food, fertilizer subsidies

NEW DELHI  —India may earmark about 4 trillion rupees ($48 billion) for food and fertilizer subsidies for the next fiscal year, two government sources said, indicating fiscal caution ahead of this year’s general election.

Food and fertilizer subsidies account for about one-ninth of India’s total budget spending of 45 trillion rupees during the current fiscal year that ends on March 31.

The Ministry of Consumer Affairs, Food and Public Distribution has estimated next year’s food subsidy bill at 2.2 trillion rupees ($26.52 billion), the two sources said. That is 10 percent higher than a projected outlay of nearly 2 trillion rupees ($24.11 billion) for the current 2023-24 fiscal year.

Additionally, next fiscal year’s fertilizer subsidy is expected to be 1.75 trillion rupees ($21.10 billion), down from the current 2022-23 fiscal year estimate of nearly 2 trillion rupees, one of the sources said.

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The sources, which are directly involved in the decision making on the subsidies, did not wish to be named as they were not authorized to speak to the media.

Finance Minister Nirmala Sitharaman will unveil the 2024/2025 budget on Feb. 1.

The Ministry of Finance, the Ministry of Chemicals and Fertilizers and the Ministry of Consumer Affairs, Food and Public Distribution ministries of finance did not reply to requests for comment.

Fiscal deficit

Maintaining the combined subsidies at their current level would be unusual for a government facing a national election in just a few months, but Prime Minister Narendra Modi is widely expected to win a rare third term in elections scheduled for April and May.

Also, containing food and fertilizer subsidies is crucial for managing India’s fiscal deficit, which Modi’s government is targeting at 5.9 percent of gross domestic product this year and planning to lower by at least 50 basis points in the fiscal year 2024/2025.

The food subsidy bill is likely to go up next year as Modi’s administration late last year extended its flagship free food welfare program for the next five years.

India runs its multi-billion dollar food welfare program, the world’s biggest such initiative, by buying rice and wheat from millions of domestic farmers at state-set minimum or guaranteed prices and then supplying the staples for free to 800 million Indians.