India’s Subsidy Surge: Navigating Fiscal Challenges in FY24

1. Projected Increase in Subsidy Bill: The subsidy bill for India is expected to surge by Rs 50,000 crore in the current fiscal year due to heightened expenditure on fertiliser, cooking gas, and food security.
2. Budget Planning: The subsidy outgo for the fiscal year 2023-24 (FY24) was initially planned at Rs 4.03 trillion but could escalate to Rs 4.53 trillion due to increased spending.
3. Coverage: Despite the rise in welfare spending, the projected subsidy bill for FY24 would still be notably less than the previous fiscal year’s subsidy bill, which stood at Rs 5.62 trillion.
4. Fertiliser Subsidy: The government allocated Rs 1.05 trillion for fertiliser subsidy in FY23. However, this allocation was revised to Rs 2.54 trillion due to a significant increase in fertiliser prices driven by the Russia-Ukraine conflict.
5. Cooking Gas Subsidy: The extension of the cooking gas subsidy to Rs 300 per cylinder for approximately 96 million low-income households, particularly ahead of Assembly elections in five states, has contributed to an increase in the LPG subsidy bill.
6. Additional Funding: To cover the increased expenditure on LPG subsidy, the government is planning to seek an additional Rs 10,000 crore in the upcoming Winter Session of Parliament.
7. Food Subsidy: In FY23, the food subsidy amounted to Rs 2.87 trillion. However, for the current fiscal year, it has been set at Rs 1.97 trillion. Despite this reduction, higher procurement costs and the extension of the free foodgrain scheme may lead to an additional Rs 15,000 crore being added to the overall food subsidy bill for the fiscal year.

In summary, the rise in India’s subsidy bill is primarily attributed to increased spending on fertiliser, cooking gas, and food security, necessitating adjustments in the budget allocations to accommodate the additional expenditure.

https://fintaxbytes.com/