ICRA estimates outlay for major subsidies at Rs 3.9 tn in FY25

Expenditure on subsidy: In the run-up to Interim Budget 2024, when all eyes will be on the government’s capex push, ICRA estimates the outlay for major subsidies (food, fertiliser, and fuel) at Rs 3.9 trillion in FY25. The outlay for major subsidies estimated by ICRA is 6 per cent lower than the expected Rs 4.2 trillion for FY2024, which entails an overshooting from the budget estimate (BE) of Rs. 3.7 trillion. 

The government extended the free food grain to people under the National Food Security Act (NFSA) for five years. This step according to the analysts will take up the food subsidy bill to be upwards of Rs 2.0 trillion for FY25. 

Fuel Subsidy

It is not only the food subsidy on which the government spends money. The government incurs a specific chunk on subsidising fuel and fertilisers. According to ICRA, in addition, the subsidy requirement for fuel is likely to be pegged at Rs 116 billion. “Amid an increase in LPG subsidy in Oct 2023 for beneficiaries under the PMUY; this is modestly higher than the outgo in FY2022-23 and expected for FY2024, while sharply lagging the FY2021 level,” ICRA added in the pre-budget memorandum. 

Fertiliser Subsidy 

Similarly, for nutrient and urea-based fertilisers, ICRA pegs the combined subsidy requirement at Rs 1.4-1.5 trillion for FY25, lower than the likely outgo in FY2024 (Rs. 1.9-2.0 trillion) amid expectations of benign commodity prices and relatively lower gas costs.  The analysts and experts are saying that it is possible that the government of India may not allocate the full amount of the expected subsidy requirement at the outset in the BE for FY2025, and calibrate the subsidy during the year, as seen in the previous fiscals.