Budget 2023: Government Cuts FY24 Subsidy Spend By 28%

The government has cut estimated spending on food, fertiliser and fuel subsidies for 2023-24.

Expenditure on food, fertilisers and petroleum—the government's largest revenue expense after interest payments—is expected at Rs 3.74 lakh crore for FY24, 28% lower than the revised estimates for the ongoing financial year, according to Budget 2023 documents.

Subsidies in FY23, however, were 64% higher than the budget estimate as the government had to step up support in the form of free food grains and fertiliser subsidies amid higher commodity inflation.

For FY24

• Food subsidies have been budgeted at Rs 1.97 lakh crore, a decline of 31% from the revised estimate for FY23.

• Fertiliser subsidy has been pegged at Rs 1.75 lakh crore, a drop of 22% from the revised estimate for FY23.

• Fuel subsidies have been budgeted at Rs 2,257 crore, a fall of 75% from the revised estimate for FY23.

The end of free food grain disbursements under the PMGKY in 2022 means a drop in food subsidies in FY24, even though allocations under the National Food Security Act have been extended. The government decided to provide free food grains to the beneficiaries of the National Food Security Act for a year, which is expected to cost at least Rs 2 lakh crore, said a pre-budget note by Barclays.

"That said, with an eye on the heavy election calendar through 2023 and the general elections in 2024, we expect the government to maintain its subsidy outlays at relatively high levels," said Rahul Bajoria, chief economist at Barclays, in the note.

Along with elevated fertiliser subsidies, additional subsidies or transfer expenditures may be introduced in view of the upcoming elections to be financed by lower subsidy spending on food, he said.