Global uncertainty and the 2024 general election are expected to keep the subsidy pot boiling with the allocation for the next fiscal likely to exceed Rs 3.7 lakh crore, which is the sum for 2023-24.

The Modi government may maintain a higher subsidy outlay for food in the coming interim budget.

The elections in various countries may contribute to fluctuations in global prices, and consequently, India will have to remain on guard to prevent spillovers into the domestic economy, North Block officials said.

Economists said the subsidy bill for food, fertiliser and fuel could cross Rs 4 lakh crore in 2024-25.

The budget estimate on food subsidy is Rs 1.97 lakh crore and Rs 1.75 lakh crore on fertiliser for this fiscal.

The Centre may increase the food subsidy in the upcoming interim budget for 2024-25 to Rs 2.2 lakh crore to account for higher food inflation.

The food subsidy budget for this fiscal has exceeded the budget target and has crossed Rs 2 lakh crore.

This is on account of fluctuations in the prices of rice and wheat due to the hike in minimum support price (MSP) as well as the extension of the free food grain scheme for five years.

The food programme would cost Rs 11.80 lakh crore over five years as the government seeks to ensure targeted welfare through the fulfilment of basic food and nutrition
requirements of the population.

The fuel subsidy bill will be higher this year as the government has increased support under the Ujjwala Yojna gas scheme.

The subsidy requirement for fuel is likely to be pegged at Rs 11,600 crore against Rs 5,813 crore in 2023-24.

“It is possible that the Centre may not allocate the full amount of the expected subsidy requirement at the outset in the budget estimate for 2024-25, and calibrate the subsidy during the year, as seen in the previous fiscals,” Aditi Nayar, chief economist ICRA said.

In nutrient and urea-based fertilisers, the subsidy requirement is Rs. 1.4-1.5 lakh crore for the next fiscal, which is lower than this fiscal amid expectations of benign commodity prices and relatively lower gas costs.