NEW DELHI: The government’s subsidy burden is expected to exceed budget estimates, swelling to almost Rs 4.1 to Rs 4.2 lakh crore for the financial year 2024-25 (FY25). A report by the Bank of Baroda revealed that the increase is primarily to higher expenses on food and fertiliser subsidies, which are likely to overburden the budgeted allocation.
Initially, the government had set a budget estimate (BE) of Rs 3.8 lakh crore for major subsidies, including food, fertiliser, and petroleum, for FY25.
However, BoB report suggests that the figure could be exceeded by almost 10 per cent due to increased costs, including the increase in the minimum support price (MSP) for Rabi crops for the 2025-26 marketing season.
The report also noted that fertiliser subsidies alone could surpass the budget by 9-10 per cent, fueled by the stronger US dollar, which has increased import costs. The government has also expanded its financial support to protect consumers from price hikes. As a result, the overall subsidy bill is projected to touch Rs 4.1-4.2 lakh crore in the upcoming fiscal year.
However, it also brings some relief with expectations for rationalised subsidies from the government.
The total subsidy burden is forecast to reduce to around Rs 4 lakh crore, with a major dip in food subsidies, projected to fall to Rs 2-2.1 lakh crore. Fertiliser subsidies, however, are likely to remain steady at Rs 1.7-1.8 lakh crore, weighted down by import cost pressures.
The report also highlighted the government’s gross borrowing target for FY25, standing at Rs 14.01 lakh crore, with net borrowing pegged at Rs 11.63 lakh crore.
Despite predicted savings in other expenditure areas, the government is expected to stick to this target, reducing reliance on small savings.
Looking ahead to FY26, net borrowing is projected to ease to Rs 10.8 lakh crore, while gross borrowing, including repayments of Rs 4.2 lakh crore, is expected to rise to around Rs 15 lakh crore.
The focus is likely to shift towards limiting debt levels, supported by the Reserve Bank of India’s expected rate-cutting cycle. Lower deposit rates could make small savings funds more accessible, helping the government manage its debt more effectively.