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Source: The post is based on the article “India said to aim for $17 bln cut in food, fertiliser subsidies in FY24” published in The Hindu on 3rd January 2023
What is the News?
The Government of India has planned to reduce food and fertilizer subsidies in this fiscal year starting April 2023.
About India’s Food and Fertilizer subsidies
Food and fertilizer subsidies alone account for about one-eighth of India’s total budget.
The government is planning to reduce these subsidies. It expects to budget about ₹2.3 trillion for food subsidies in the coming fiscal year compared with ₹2.7 trillion for the current year.
A large part of the food subsidies savings will come from the end of a COVID-19-era free food scheme which will be replaced with a lower-spending programme. That will effectively halve the free rations available to the poor in a year.
Similarly, spending on fertilizer subsidies will also likely be reduced to about ₹1.4 trillion compared with almost ₹2.3 trillion this year.
The reduction in fertilizer subsidies is driven by expectations of lower crude oil prices and the government’s revised gas procurement policy for fertilizer companies.
What will be the impact of this decision?
This will help the government reduce its fiscal deficit which is targeted at 6.4% of GDP for the current fiscal year.
This is far above the average of 4% to 4.5% over the past decade excluding the pandemic years when spending surged and the ratio peaked at 9.3%.
