India aims to cut food, fertilizer subsidies by $17 billion in 2023/24

 

The government expects to budget about Rs 2.3 trillion for food subsidies in the coming financial year, up from Rs 2.7 trillion in the current year till March 31.

India aims to reduce spending on food and fertilizer subsidies to 3.7 trillion rupees ($44.6 billion) in the fiscal year from April, down 26% from this year, two government officials said. Epidemic.

Food and fertilizer subsidies account for about an eighth of India's total budget expenditure of Rs 39.45 trillion this fiscal year, but cuts to food subsidies in particular could prove politically sensitive with elections looming.

The two officials said the government expects to budget about 2.3 trillion rupees for food subsidies in the coming fiscal year as of March 31, compared to 2.7 trillion rupees in the current year.

According to an official and a third government official, the expenditure on fertilizer subsidy is likely to fall to around Rs 1.4 trillion. The third official said that this year it can be compared to about Rs 2.3 lakh crore.

The officials declined to be named because the information is not public.

The finance ministry declined to comment, while the food and fertilizer ministries did not immediately respond to requests for comment.

The first two officials said a large portion of the savings would come from the end of a COVID 19-era free food plan, to be replaced by a reduced-cost program.

This will effectively halve the free rations available to the poor in a year coinciding with a series of state elections, while general elections are due in 2024.

The government is keen to bring down its fiscal deficit, which is targeted at 6.4% of GDP for the current fiscal.

This is much higher than the average of 4% to 4.5% over the past decade, except in the pandemic years when spending increased and the ratio reached 9.3%.

The government plans to reduce the ratio by at least half a percentage point in 2023/24, the first two officials said.

The subsidy numbers will be announced on 1 February, when Finance Minister Nirmala Sitharaman presents the 2023/24 federal budget to Parliament.

All three officials said the latest subsidy estimates for 2023/24 could be adjusted when the final round of discussions takes place by mid-January.

Two officials said the reduction in fertilizer subsidy is also driven by lower crude oil prices and expectations from the government's revised gas purchase policy for fertilizer companies, which came into effect earlier this month.