India's food subsidy bill likely to reach Rs 2.05 lakh crore, shows FY25 Budget

The subsidy bill is a major expenditure item for India’s central government.

India's food subsidy bill is projected to be Rs 2.05 lakh crore for 2024-25, about 3.3 percent lower than the revised estimate for the current fiscal.

The Centre had earmarked Rs 1.97 lakh crore as food subsidy bill for fiscal 2023-24, which is now likely to shoot up to Rs 2.12 lakh crore, as per the revised estimate. This increase can be attributed to the decision to extend the Pradhan Mantri Garib Kalyan Anna Yojana by another five years from January 1, 2024. The flagship welfare programme provides free grains to around 81.35 crore beneficiaries.

The approximate food subsidy for five years for distribution of food grains under the scheme will be to the tune of Rs 11.80 lakh crore.

The government on December 6 sought the Lok Sabha nod to spend an additional Rs 58,378 crore in 2023-24 as part of its first batch of supplementary demands for grants, out of which Rs 4,807 crore more will be spent as subsidy to states on decentralised procurement of food grains under the Pradhan Mantri Garib Kalyan Anna Yojana.

Expenditure on subsidies such as food and fertiliser plays a key role in the government's ability to manage its fiscal deficit, which is expected to reach 5.1 percent of the gross domestic product in the next financial year, according to the interim budget unveiled on February 1.

India has started the process of lowering the expenditure on various major subsidies, especially those which claim a significant component of the Centre's revenue expenditure. In fact, the subsidy expenditure was brought down from 3.6 percent of the GDP in FY21 to 1.9 percent of the GDP in FY22, as per provisional estimates.

However, the sudden outbreak of geopolitical conflict resulting in higher international prices for food, fertiliser and fuel led to higher subsidy requirements since 2022 in a bid to support the vulnerable.

Major subsidies, including food, fertiliser and petroleum at Rs 3.81 lakh crore form roughly 10.4 percent of Revenue Expenditure of the Budget estimate of 2024-25. Major subsidies as percent of GDP are expected to decline from 1.4 percent in the revised estimate of 2023-24 to 1.2 percent in the Budget estimate of 2024-25.