Government sees surge in subsidies, but no hit to growth

FOod and fertiliser certificate remains the authorities’s top out antecedence even out as subsidies on fuel and fertiliser may surge because of external factors, senior officials said on Tuesday, and added this would not impact India’s growth momentum as the Union budget 2026-27 had factored in such eventualities in advance.The department of fertilisers has sought a 100% increase in the fertiliser subsidy allocation to around ₹3.42 lakh crore for 2026-27 — double the budget estimate of ₹1.71 lakh crore — as global supply disruptions and price volatility from the West Asia conflict drive up import costs sharply. Alongside this, the government has absorbed approximately ₹1.20 lakh crore in costs to shield consumers from steeper fuel price hikes by state-run oil marketing companies over 78 days, said one of the officials, who declined to be named.Also read: With 12 years in office, Modi becomes India's longest-serving PM; NDA to honour himThe scale of the fertiliser cost surge is visible in per-unit terms. “We supply fertilisers to our farmers at around ₹300 per bag while our import cost per bag has surged to approximately ₹3,000. Per bag subsidy is now about ₹2,700,” the official said, adding that the government was ramping up domestic production capacity to reduce import dependence.India imports fertilisers in large quantities, with suppliers in West Asia, the Gulf, and North Africa accounting for the bulk — most of it transiting the Strait of Hormuz, now disrupted by the conflict.The Union budget 2026-27, presented by finance minister Nirmala Sitharaman on February 1, was prepared at a time when economies were already facing headwinds from tariff uncertainties severely impacting global supply chains, and was designed with headroom for further external shocks.Beyond the fertiliser subsidy line, the budget provided ₹2.27 lakh crore for food subsidy and ₹12,084.51 crore for cooking gas subsidy. It also established an Economic Stabilisation Fund with a proposed corpus of ₹1 lakh crore — with ₹50,000 crore allocated in the revised estimates for 2025-26 — separate from a Price Stabilisation Fund of ₹4,100 crore covering buffer stocks of pulses, onions, and potatoes. “It was well thought of, factored in global uncertainties,” the official said.Also read: EC to meet Congress delegation over rejection of Meenakshi Natarajan's nomination on WednesdayOn fuel, the ₹1.20 lakh crore government outgo includes the excise duty cut of ₹10 per litre on petrol and diesel announced on March 27 — a move costing the exchequer approximately ₹14,000 crore per month — as well as other support to oil marketing companies to offset their mounting under-recoveries during the 78-day price freeze.Despite the external pressures, the official said the fiscal deficit target of 4.3% of GDP for 2026-27 remains intact, supported by active non-tax revenue mobilisation through disinvestment and asset monetisation, with a target of ₹80,000 crore.Also read: Air India flyer breaks window pane before landing; ‘No Fly’ action under reviewIndia’s GDP grew 7.7% in 2025-26, with 7.8% growth in the fourth quarter, and first-quarter output for fiscal 2027 is expected to hold at a similar level.Domestic consumption continues to propel the economy, and El Nino and the risk of a deficient monsoon remain contingent threats, with the picture expected to be clearer by August. “Hence, the government stays on the reform course and it would not pull back its capital expenditure plans for FY27,” the official said.In a coordinated response to currency pressure, the finance ministry on Friday announced measures to widen investment options for foreign portfolio investors in Indian equities and made government bonds more attractive through tax concessions.The Reserve Bank of India introduced hedging cost subvention for external commercial borrowings to boost foreign exchange inflows. The rupee appreciated 56 paise on Friday to close at ₹95.18 per dollar.