Subsidy allocation may stay at Interim Budget levels, says report

Government is expected to maintain the Rs 4.1 lakh crore subsidy allocation for 2024-25

The government is expected to maintain the Rs 4.1 lakh crore subsidy allocation for 2024-25, as announced in the interim budget in February this year, according to a news report in The Economic Times on June 18.

This allocation is 7% lower than the revised estimate of Rs 4.41 lakh crore for 2023-24, but the paper quoted senior government official stating that they do not anticipate any changes in the subsidy bill estimate now, as compared to what was projected in the Interim Budget.

Moneycontrol is yet to independently verify the report, which also mentions that outlay for rural schemes could be revised higher. Network18 too had reported in April that the Centre is considering a proposal to widen the scope and size of housing subsidy for the urban poor under the PM Awas Yojana (PMAY).

The Budget is expected to be presented in the third week of July, and it is learnt that NDA 3.0 may give more teeth to certain schemes that support welfarism, while sticking to fiscal prudence.

The Centre will likely stick to the fiscal gap target of 5.1 percent of the GDP for the ongoing financial year in the upcoming Budget, given its commitment to stick to the medium-term target of bringing the deficit down to below 4.5 percent of the GDP by FY26, they said.

The thrust on capital expenditure is expected to continue in the Budget, given its multiplier impact on the economy, a person familiar with the developments told Moneycontrol, requesting not to be named.

Fitch's Asia Sovereign Ratings Director Jeremy Zook had told Moneycontrol earlier in June that India's fiscal consolidation roadmap beyond 2025-26 is key to any positive ratings action on India. "If we have confidence that the government’s commitment to fiscal consolidation will put the debt to GDP ratio on a more sustainable downward trend that would potentially be supportive of a positive action for the rating. And, I think for that we will be watching the Budget to get more clarity on the fiscal path beyond FY26," Zook told Moneycontrol in an interview.