Interim Budget 2024: Volatile geopolitics could impact Indian subsidy math in 2024; here's how

The Modi government may maintain a higher subsidy outlay for food and fertilizer in the coming interim budget, according to sources in the finance ministry. Officials are of the view that elections in various countries may possibly contribute to fluctuations in global prices, and consequently India will have to remain on guard to prevent spill overs into the domestic economy. 

The budget estimate for the current fiscal on total spending on various subsidies including fuel is Rs 3.74 lakh crore, with Rs 1.97 lakh crore for food and Rs 1.75 lakh crore for fertilizers. 

"This is an important year on the geopolitical front," said an official. 

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

The food subsidy budget estimate for 2023-24 was Rs 1.93 lakh crore, which has already 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 - Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKYAY). 

The food subsidy, both a consumer and producer subsidy, is used to purchase grains from farmers at MSP and then sell to poor households at lower prices, some for free. 

The centre believes that fertilizer prices in FY25 could be a stable, and it may not need a higher subsidy.

The union budget for the current fiscal had allocated Rs 1.75 lakh crore towards the fertiliser subsidy. An additional Rs 13,350 crore was given towards phosphatic and potassic (P&K) fertiliser subsidy via the supplementary demand for grants in the recent winter session of Parliament.