Union Budget likely to raise subsidy spending by 8% next fiscal

India is likely to increase its allocation for major subsidies, including food, fertilisers, and cooking gas, by 8% to Rs 4.1 lakh crore ($47.41 billion) in the upcoming fiscal year,  sources reportedly stated. The move comes as Union Finance Minister Nirmala Sitharaman prepares to present the Union Budget on February 1 against the backdrop of a slowing economy and global uncertainties.
Rural Recovery Drives Subsidy Focus
The rural economy, a major recipient of subsidies, has shown signs of recovery. Sustaining these subsidies will be pivotal as urban regions and corporate investments continue to exhibit signs of economic weakness.Food subsidies, which form a significant portion of the overall allocation, are projected to rise by 5% to nearly Rs2.15 lakh crore ($24.86 billion) in the fiscal year beginning April 1. Higher procurement of rice and rising storage costs are among the factors driving this increase. For the current fiscal year, the food subsidy bill is pegged at Rs2.05 lakh crore ($23.70 billion).
Energy Subsidies See a Boost
According to information,the government is also likely to allocate Rs 25,000 crore ($2.89 billion) for cooking gas subsidies, more than double the Rs 11,900 crore ($1.38 billion) budgeted for the current fiscal year. This increase reflects efforts to cushion households from rising energy costs. Meanwhile, the fertiliser subsidy is expected to remain steady at Rs1.7 lakh crore ($19.66 billion), maintaining support for agricultural inputs critical to rural livelihoods.
Subsidies: A Key Pillar of Government Spending
Subsidies, encompassing food, fuel, and fertilisers, account for around 8% of India’s total annual spending, estimated at $557 billion for the current fiscal year. As global energy prices and food costs remain elevated, this moderate increase aims to balance fiscal prudence with the need to support vulnerable populations. 
Budget to Address Slowing Growth 
The 2025 Budget is set to be presented amid slowing growth in Asia’s third-largest economy. While urban demand and private sector investment have shown weakness, targeted subsidies aim to provide a safety net, particularly in rural areas where recovery is taking hold.India’s finance, food, and fertiliser ministries have yet to comment on the proposed subsidy outlay. However, with global uncertainties looming, the Budget’s focus on ensuring economic resilience and equity is evident.

(Business Correspodent)