Government Increases Subsidy Spending Amidst Fiscal Challenges

The central government has ramped up its subsidy disbursements, exceeding last year's figures. A Bank of Baroda report reveals that food subsidies drive this surge, while fertilizer subsidies decline. Despite fiscal strain, total government expenditure rises, signaling commitment to welfare programs amid fiscal challenges.

The Indian government has markedly increased its subsidy allocations this fiscal year, outpacing spending from the previous two years. A recent report by the Bank of Baroda highlights a Rs 2.49 lakh crore expenditure on subsidies between April and October, surpassing the Rs 2.32 lakh crore recorded the same time last year and Rs 2.39 lakh crore in 2022.

While food subsidy spending continues to climb, fertilizer subsidies have dwindled to a two-year low. The government has allocated Rs 1.02 lakh crore for fertilizer subsidies within the April-October period of this fiscal year, a decline from Rs 1.20 lakh crore last year and Rs 1.03 lakh crore in 2022.

The report emphasized that food subsidies are pivotal in this fiscal expansion, with a marked increase from Rs 1.11 lakh crore last year to Rs 1.40 lakh crore this year. The overall subsidy disbursement until FYTD25 reflects a heightened governmental focus on welfare initiatives despite a swelling fiscal deficit, which rose to 5.1% of GDP as of October 2024. Sluggish revenue growth has fueled fiscal concerns, though government expenditure grew by 3.3% through October FYTD25, supported by an 8.7% surge in revenue spending.

(With inputs from agencies.)