The increase in allocation for food subsidy in the next financial year is a reflection of an increase in the minimum support price (MSP) of rice and wheat.
The Centre proposed to increase the food subsidy allocation by 7.5 percent to Rs 1.84 lakh crore for 2019-20, mainly due to a rise in minimum support price, but no change in subsidised rates of foodgrains was announced.
The increase in allocation for food subsidy in the next financial year is a reflection of an increase in the minimum support price (MSP) of rice and wheat, which are supplied to the poor at subsidised rates via ration shops.
In Budget 2018, then Finance Minister Arun Jaitley had allocated Rs 1.69 lakh crore, which has been increased to Rs 1.71 lakh crore in revised estimates towards food subsidy. The allocation was Rs 1.0 lakh crore in 2017-18.
The Centre provides major subsidies across three sectors—food, fertilizer and petroleum. These three subsidies will amounted to Rs 2.96 lakh crore in 2019-20, out of which food has the largest share of 62 percent.
Reviving the agriculture sector is particularly crucial for the NDA government as it gears up for the Lok Sabha election in 2019. Besides, as the agrarian sector has been reeling under farm sector distress, is agriculture the prime area of focus in the interim budget.
In the interim budget, finance minister Piyush Goyal on Friday announced Pradhan Kisaan Samman Nidhi that will enable farmers to receive Rs 6,000 a year directly into their bank accounts. About 120 million farmers owing upto two hectares of land will be eligible scheme.
The scheme, which will be funded entirely by the government, will kick in retrospectively from December 2018. Beneficiary farmers will get the money in three equal installments during the year.
The announcement is in line with the government's vision of doubling farmer’s income in five years.
Farm sector slowdown has snowballed into a big political issue ahead of the Lok Sabha elections in April-May. Prices have fallen sharply in many commodities, pummeled by a production glut, forcing many farmers to dump their produce at extremely low prices that hardly covers for their cost.
Many states, including Madhya Pradesh, Chhattisgarh and Rajasthan, where the Congress has recently formed governments upstaging the BJP, have announced loan write offs for farmers to tide over an income crisis.
According to first advance estimate of Gross Domestic Product (GDP) released by the Central Statistics Office earlier this month, farm sector is set to grow at 3.8 percent against 3.4 percent last year, at constant or inflation-adjusted prices.