India’s Union Budget 2023 seeks to eliminate $17 billions

According to reports, India’s Union Budget 2023 seeks to eliminate $17 billion in food and fertiliser subsidies in 2023/24.

Two government sources indicated that India plans to reduce expenditure on food and fertiliser subsidies to Rs 3.7 lakh crore ($44.6 billion) in the fiscal year beginning in April, a 26% decrease from this year, in order to reduce a budget deficit that swelled during the COVID-19 epidemic.

Food and fertiliser subsidies alone account for over one-eighth of India’s entire budget spending of Rs 39.45 lakh crore this fiscal year, but cuts to food subsidies in particular may be politically sensitive with elections on the horizon.

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According to the two officials, the government aims to fund roughly Rs 2.3 lakh crore for food subsidies in the coming fiscal year, up from Rs 2.7 lakh crore in the current fiscal year to March 31.

According to one of the sources and a third government official, spending on fertiliser subsidies would likely reduce to around Rs 1.4 lakh billion. This compared to over Rs 2.3 lakh crore this year, according to the third official. Because the information was not public, the officials declined to be identified.

The finance ministry declined to comment, and the food and fertiliser ministries did not respond to calls for comment right away. According to the first two officials, a substantial portion of the savings will come from the termination of a COVID 19-era free meal programme, which will be replaced with a lower-spending programme.

This would essentially cut the number of free meals accessible to the poor in a year due to a succession of state elections, with nationwide elections looming in 2024. The government is eager to reduce its fiscal deficit, which is expected to be 6.4% of GDP this fiscal year.

That is significantly higher than the 10-year average of 4% to 4.5%, excluding the pandemic years when spending increased and the ratio peaked at 9.3%.

According to the first two officials, the administration intends to reduce the ratio by at least half a percentage point in 2023/24. The subsidy figures will be released on February 1st, when Finance Minister Nirmala Sitharaman unveils the Union Budget for Fiscal Year 24 in Parliament.

According to the three officials, the most recent subsidy projections for 2023/24 may be revised during a final round of negotiations in mid-January.

Fertiliser subsidies are also being reduced due to decreased crude oil prices and the government’s amended gas procurement strategy for fertiliser businesses, which went into force earlier this month, according to two officials.