The government has cut spends on food, fertiliser and fuel subsidies for 2022-23.
Expenditure on food, fertilisers and petroleum—the government's largest revenue expense after interest payments—is expected at Rs 3.18 lakh crore for FY23, 26.6% lower than the revised estimates for the ongoing financial year, according to Budget 2022 documents.
Spending on subsidies in FY22, however, was 29.1% higher than the budget estimate as the government had to step up support in the form of free foodgrain and fertiliser subsidies to fight the Covid-19 pandemic and higher commodity inflation.
For FY23:
Food subsidies have been budgeted at Rs 2.07 lakh crore, a decline of 27.8% from the revised estimate for FY22.
Fertiliser subsidy has been pegged at Rs 1.05 lakh crore, a drop of 24.9% from the revised estimate for FY22
Fuel subsidies have been budgeted at Rs 5,813 crore, a fall of 10.8% from the revised estimate for FY22.
While fertiliser and petroleum subsidies are also likely to moderate in FY23, high global commodity prices in 2022 is the key risk, Goldman Sachs had said in a pre-budget note. Assuming no further significant disruptions due to Covid waves, spending on the Pradhan Mantri Garib Kalyan Anna Yojana, too, is likely to decline, the note had said.
Still, social and welfare spending needs remain high. There are vulnerabilities at the bottom of the pyramid which could keep demand and growth weak, Pranjul Bhandari, chief India economist at HSBC, said. As such, it may be a good idea to keep social welfare spending elevated for longer.
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