A farmer spreads fertiliser on his field in Satara district, Maharastra. File
| Photo Credit: Reuters

India may earmark about $48 billion for food and fertiliser subsidies for the next fiscal year, two government sources said, indicating fiscal caution ahead of this year’s general election.

Food and fertiliser subsidies account for about one-ninth of India’s total budget spending of over ₹45 trillion during the current fiscal year that ends on March 31.

The Ministry of Consumer Affairs, Food and Public Distribution has estimated next year’s food subsidy bill at $26.52 billion, the two sources said. That is 10% higher than a projected outlay of nearly $24.11 billion for the current 2023-24 fiscal year.

Additionally, next fiscal year’s fertiliser subsidy is expected to be $21.10 billion, down from the current 2022-23 fiscal year estimate of nearly ₹2 trillion, one of the sources said. The sources, which are directly involved in the decision making on the subsidies, did not wish to be named as they were not authorised to speak to the media.

Finance Minister Nirmala Sitharaman will unveil the Union Budget 2024-25 on February 1.

The Ministry of Finance, the Ministry of Chemicals and Fertilizers and the Ministry of Consumer Affairs, Food and Public Distribution and the Ministry of Finance did not reply to requests for comment.

Maintaining the combined subsidies at their current level would be unusual for a government facing a general election in just a few months, but Prime Minister Narendra Modi is widely expected to win a third term in elections scheduled for April and May. Also, containing food and fertiliser subsidies is crucial for managing India’s fiscal deficit, which Mr. Modi’s Government is targeting at 5.9% of gross domestic product this year and planning to lower by at least 50 basis points in the fiscal year 2024-25.

The food subsidy bill is likely to go up next year as the Centre late last year extended its flagship free food welfare programme for the next five years. India runs its multi-billion dollar food welfare programme, the world’s biggest such initiative, by buying rice and wheat from millions of domestic farmers at state-set minimum or guaranteed prices and then supplying the staples for free to 800 million Indians.

Illustration: Satheesh Vellinezhi

With the global economy adrift, Finance Minister Nirmala Sitharaman sought to carve out an ark for India in her fifth Union Budget by trying to nudge domestic consumption and reluctant private investments upwards, while also seeking to create a feel-good factor among specific segments of voters as the government gears up for the 2024 Lok Sabha polls.

The FM summed up the BJP-led government’s achievements since 2014 as “leaving no one behind”, taking just 200-odd words to outline the doubling of per capita income to ₹1.97 lakh, the increasing formalisation of the economy and the expansion of targeted benefits. She then used the rest of her Budget speech to soothe sections of society that may have felt a tad left behind over its nine-year-tenure.

To assuage the salaried middle class, deflated by a sustained streak of high inflation, the tax-free limit under the new exemption-less income tax regime was raised to ₹7 lakh from ₹5 lakh. The cap on non-government employees’ leave encashment at the time of retirement was raised to ₹25 lakh from ₹3 lakh.

Help for those left behind

The first Budget of the Amrit Kaal — the 25-year period leading to the centenary of Indian independence in 2047 — aimed to build on existing “inclusive development” efforts that assign overall priority for the underprivileged, the Minister said. She launched new socio-economic development schemes: the PM Particularly Vulnerable Tribal Groups Development Mission, and the PM Vishwakarma Kaushal Samman to support artisans from weaker sections and Scheduled Castes, Scheduled Tribes and Other Backward Classes.

Some measures were also announced to alleviate the lot of micro, small and medium enterprises that have faced successive shocks over the last few years, from demonetisation to the pandemic.

Poll-pleasing focus on jobs

While the Finance Minister addressed various sections’ aspirations through her less-than-90-minutes speech, the broader underlying message was aimed at India’s restive youth and their hopes of securing a job.

References to “job” creation in a Budget speech hit a six-year high, with the Minister flagging it seven times in different contexts, compared to just two mentions in the 2022-23 Budget speech and three references in the year before that.

Giving an impetus to growth and job creation, and creating opportunities, especially for the youth, she said, was a key focus of the government’s economic agenda to achieve its vision for the Amrit Kaal, which will culminate in 2047.

It is perhaps no coincidence that the last time job creation figured high (with six mentions) was when the late Arun Jaitley presented the Budget for 2018-19 — another Budget presented in the year before a general election.

Capex plans depend on States

Polls apart, the Budget’s grand plan to ramp up infrastructure capex to ₹10 lakh crore in the hope that it gives greater traction to a revival in private investments will hinge on the States — which have been offered ₹1.3 lakh crore in the form of 50-year interest-free loans — doing their bit, and Indian industry being bold enough to take risks during a tumultuous, unpredictable period also marked by rising interest rates.

The deposit limit on savings schemes for senior citizens was doubled to ₹30 lakh and a new one-time small savings scheme was also announced for women to invest upto ₹2 lakh with 7.5% returns assured for two years.

An uptick in small savings collections will also help the government fund its fiscal deficit target of 5.9% of GDP in the coming year (from the 6.4% estimated in 2022-23), with net market borrowings pegged at ₹11.8 lakh crore, Ms. Sitharaman said.

While the Economic Survey projected a 6.5% growth for the year ahead, the Budget estimates a nominal GDP growth of 10.5% for its revenue calculations. Finance Secretary T.V. Somanathan explained that this could be derived from any combination of real growth and inflation, and was not a yardstick for hopes about either.

Rajasthan Chief Minister and senior Congress leader Ashok Gehlot
| Photo Credit: PTI

Rajasthan Chief Minister Ashok Gehlot on February 1 criticised the Union Budget for neglecting the important areas of education, health and social justice and reducing the allocation by 33% for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which had proved to be a lifeline for the poor during the COVID-19 pandemic.

Mr. Gehlot said the Budget was against the poor, landless farmers and common people.

“Only headline-making hollow announcements have been made in the Budget… The provision for agriculture and farmers’ welfare is 6%, or ₹7,500 crore, less than the previous year. Similarly, there is a reduction of 15%, or ₹23,000 crore, in the subsidy for urea,” Mr. Gehlot said while reacting to the Budget.

Also Read | Explained | The funding and demand for MGNREGA

The negligible increase in the budgetary allocations for education, health and women and child development had shown that these areas would remain neglected, Mr. Gehlot said. Besides, the life of the common man would become even more difficult in the absence of any policy statement for reducing inflation, he added, while pointing to the spiralling prices of essential commodities.

The senior Congress leader said the Budget was “very disappointing” for Rajasthan, as the demand for giving national status to the Eastern Rajasthan Canal Project (ERCP), which would benefit 13 districts through interlinking of three rivers, had not been accepted. The project was directly related to the development of the State, he said.

“The Narendra Modi government has sanctioned ₹5,300 crore as an additional assistance to Karnataka for the Upper Bhadra Project, keeping the elections in mind. This shows the Centre’s step-motherly treatment towards Rajasthan,” Mr. Gehlot said.

Mr. Gehlot said the people of Rajasthan would give a “befitting reply” for the treatment meted out to them at the appropriate time.