India sees subsidy surge but expects growth to hold

India's government is bracing for a substantial increase in subsidies for fuel and fertilizers, driven by global supply disruptions and price volatility, particularly stemming from the conflict in West Asia. Despite these external pressures, senior officials assert that the country's economic growth momentum will remain unaffected, as the Union budget for 2026-27 had proactively factored in such eventualities.

The Department of Fertilizers has requested a doubling of the subsidy allocation for 2026-27, projecting a need of approximately ₹3.42 lakh crore, a sharp increase from the budgeted ₹1.71 lakh crore. This surge is attributed to soaring import costs, with one official noting that the government supplies fertilizers to farmers at around ₹300 per bag while the import cost has escalated to approximately ₹3,000 per bag, resulting in a per-bag subsidy of about ₹2,700. To mitigate dependence, the government is also working to enhance domestic production capacity.

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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.

In addition to fertilizer costs, the government has absorbed about ₹1.20 lakh crore to shield consumers from steeper fuel price hikes. This figure includes the excise duty cut of ₹10 per liter on petrol and diesel announced in March, which costs the exchequer roughly ₹14,000 crore monthly, as well as other support provided to state-run oil marketing companies to offset their under-recoveries during a 78-day price freeze.

Officials highlighted that the Union budget, presented on February 1, was formulated with foresight, anticipating global economic headwinds and supply chain disruptions. The budget included provisions for food subsidies (₹2.27 lakh crore) and cooking gas subsidies (₹12,084.51 crore). Furthermore, it established an Economic Stabilisation Fund with a proposed corpus of ₹1 lakh crore to manage unforeseen economic shocks, demonstrating a well-thought-out strategy to maintain fiscal stability amidst global uncertainties.

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It was well thought of, factored in global uncertainties.