Government Reduces Subsidies in 2024-25 Budget to Promote Fiscal Prudence

The 2024-25 Budget reduces subsidies for food, fertilizer, and fuel by 7.8%, totaling Rs 3,81,175 crore, balancing fiscal prudence with welfare measures.

Key Points

• The 2024-25 Budget reduces subsidies for food, fertilizer, and fuel by 7.8%.
• Total subsidy allocation is set at Rs 3,81,175 crore, aligning with interim budget estimates.
• Food subsidy is Rs 2,05,250 crore, fertilizer subsidy is Rs 1,64,000 crore, and petroleum subsidy is Rs 11,925 crore.
• The reduction aims to balance fiscal prudence with welfare measures.
• The subsidies benefit millions, supporting food security, affordable farming, and household energy needs.

In a move signaling fiscal prudence, the Indian government has announced a 7.8% reduction in subsidies for food, fertilizer, and fuel in the full Budget for 2024-25, presented by Finance Minister Nirmala Sitharaman in the Lok Sabha. The total subsidy allocation stands at Rs 3,81,175 crore for the current fiscal, down from Rs 4,13,466 crore in the previous year. This reduction aligns with the estimates projected in February’s interim budget, indicating a calculated approach to balancing fiscal consolidation with welfare measures.

Breaking down the allocations, the food subsidy has been set at Rs 2,05,250 crore, slightly lower than the revised estimates of Rs 2,12,332 crore for the fiscal year ending March 31, 2024. This subsidy covers the difference between the economic cost of foodgrains procured by the government and their sales realization under the National Food Security Act (NFSA) and other welfare schemes. This initiative benefits approximately 80 crore individuals, ensuring food security for a significant portion of the population.

The fertilizer subsidy has experienced a more substantial cut, with Rs 1,64,000 crore earmarked for 2024-25, compared to the revised estimates of Rs 1,88,894 crore for the previous fiscal. This subsidy supports manufacturers and helps maintain affordable prices for farmers, covering both urea and non-urea fertilizers like DAP and MOP. The reduction in fertilizer subsidy aims to streamline the support while continuing to assist the agricultural sector.

Petroleum subsidies, primarily for cooking gas (LPG), have been marginally reduced to Rs 11,925 crore, down from Rs 12,240 crore in the 2023-24 revised estimates. This slight reduction reflects the government’s effort to manage subsidy expenditures while still providing necessary support for household energy needs.

The government’s decision to maintain the subsidy estimates from the interim budget underscores a commitment to balancing fiscal prudence with essential welfare measures. By carefully managing subsidy allocations, the government aims to ensure sustainable economic growth while continuing to support the most vulnerable sections of society.

The strategic reduction in subsidies is seen as a move to promote economic stability and reduce fiscal deficits. However, it also reflects the government’s focus on ensuring that welfare measures are targeted and efficient. The adjustments in subsidy allocations are expected to provide the necessary fiscal space for other developmental and infrastructural projects, further contributing to the nation’s economic resilience.

The 2024-25 Budget reflects a nuanced approach to fiscal policy, balancing the need for economic prudence with the imperative of supporting the population through critical subsidies. This careful management of resources highlights the government’s dedication to fostering a robust and inclusive economy.