According to a senior official and a document obtained by Reuters, India’s spending on subsidised food grain to the poor might reach Rs 2.7 lakh crore ($32.74 billion) this fiscal year, as the government continues to offer assistance to the underprivileged at least till December.
The federal government’s food subsidies would likely increase by 30% over the Rs 2.07 lakh crore ($25.14 billion) planned in the budget, according to an official who spoke on the condition of anonymity because the deliberations are private.
Increased food grain and fertilizer subsidies are projected to burden the federal budget, despite the government’s high tax revenues this year. According to Reuters, this might push it to slash other spending in order to close the planned budgetary imbalance of 6.4% of GDP.
According to a government document obtained by Reuters, the Department of Expenditure has already disbursed food grain subsidies worth around Rs 1.5 lakh crore to the state-run Food Corporation of India and states as of the end of November.
Since the government launched a programme in April 2020 to distribute free rice or wheat to around 800 million people in order to alleviate the burden on family earnings caused by the COVID-19 epidemic, India’s food grain subsidy bill has skyrocketed.
The plan is set to operate from April 2020 to December 2022, with a total budget of Rs 3.9 lakh crore ($47.25 billion).
The finance ministry in India has resisted extending the measures, citing fiscal pressures on the government.
However, if the government extends the programme beyond December 31, when it is scheduled to terminate, the expenditures might grow much more.
If the plan is prolonged until March 2023, the expenditure will rise to over 3.1 trillion rupees, the second highest ever, according to the official.
In 2021/22, when the government’s free food grain distribution plan was in effect throughout the year, India’s food grain subsidy cost totaled Rs 2.9 lakh crore.
The government spent nearly Rs 5.3 lakh crore on food grain subsidies in 2020/21, however this was largely due to their decision to settle the Food Corporation of India’s prior borrowings.
The Ministries of Finance and Consumer Affairs, Food, and Public Distribution did not immediately respond to Reuters’ emails.
For 2022/23, the total federal government expenditure in India is estimated to be Rs 39.4 lakh crore.
The government is also facing a high fertilizer subsidy bill, exceeding the estimated Rs 1.05 lakh crore in the budget, as a result of the war in Ukraine.