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India Boosts Spending: ₹1.3 Trillion for Subsidies & Imports
1 Dec
Summary
- Government plans ₹1.3 lakh crore additional spending for subsidies.
- Funds allocated for fertiliser, urea imports, and fuel price compensation.
- Net additional spending is unlikely to impact the fiscal deficit target.
The Indian government has tabled supplementary demands for grants, seeking parliamentary approval for an additional expenditure of ₹1.32 lakh crore for the fiscal year 2025-26. A substantial portion of these funds, amounting to ₹11,000 crore, is designated for fertiliser subsidies, alongside ₹7,525 crore for urea imports and ₹9,473 crore to offset losses incurred by state-run oil-marketing companies on fuel sales. This fiscal boost also encompasses additional revenue spending by the Union home and education ministries.
The net cash outgo from these proposals is approximately ₹41,455 crore, which is not expected to significantly disrupt the government's fiscal deficit target of ₹15.69 trillion. Factors such as potential savings in effective capital expenditure and strong Gross Domestic Product (GDP) growth are projected to absorb this extra spending. Other allocations include funds for higher education, the direct tax department, and development packages for Manipur and Ladakh.
Despite concerns about lower nominal GDP growth impacting revenue projections, India's economy displayed robust real GDP growth of 8.2% in July-September. The government aims to manage its fiscal deficit carefully to meet its debt reduction target of 50% of GDP by March 2031, while economic growth continues to be a positive indicator for future revenue streams.
