Subsidy spending has grown faster post-Covid but Budget share has declined

Analysis shows that food and fertiliser spending have grown the fastest during the period. Between 2019-20 and 2024-25, food subsidies were up 13.6 percent compared with a contraction of 1.6 percent in the first term, while fertiliser subsidies have expanded 15.1 percent annually in the past six years.

The share of the two in the government’s total subsidy spending has increased from 72 percent in the years before the pandemic to over 85 percent since FY21.

The free foodgrain scheme, which covers 813.5 million beneficiaries, was extended for five years with effect from January 1, 2024. This expansion, however, has not disturbed government math, as subsidy spending as a share of budget and GDP has declined since 2014-15.

While subsidies accounted for more than 2 percent of the country’s GDP in 2014-15, in 2024-25, the share is likely to be 1.32 percent, similar to what the government spent in 2019-20.

As a share of the Budget, subsidy spending has nearly halved over the decade. While subsidies accounted for 15.5 percent of the total budget spend in 2014-15, this year, the share is expected to be 8.9 percent.

In 2019-20, 9.6 percent of Budget allocation was towards subsidies.

Farmers get more

The major benefit of these spends has accrued to farmers. According to Moneycontrol, programmes directed towards farmers like the modified interest subvention scheme have grown faster than other spending.

The share of farmer or agriculture-oriented programmes in subsidy spends went up from around 38 percent in 2019-20 to over 45 percent in 2024-25.