5 Percent Cut in Food, Fertilizer and Fuel Subsidies

02-Feb-2026 12:53 PM

New Delhi: The Union Budget for the financial year 2026–27, presented in the Lok Sabha on 1 February, failed to meet expectations across most sectors, clearly indicating that the central government’s fiscal health is not entirely robust. Cuts in expenditure on essential social security sectors are likely to have an adverse impact on agriculture, rural development, employment, and farmers’ income.

It is noteworthy that the central government increases the minimum support price (MSP) for kharif and rabi crops every year and procures large quantities of paddy and wheat at these support prices. This has led to a continuous rise in food subsidy expenditure. However, for the next financial year, the budget allocation for critical areas such as food, fertilizer, and fuel (LPG cylinders) has been reduced by around 4.7 percent and fixed at ₹4.3 lakh crore (₹43 trillion).

According to revised estimates, food subsidy expenditure for the financial year 2025–26 is projected at ₹4.10 lakh crore. While the new budget allocation is marginally higher than this estimate, it is still 4.7 percent lower compared to the total budget allocation approved for the full financial year 2025–26 (April–March).

In her budget speech, the Finance Minister stated that the key operational anchor for setting fiscal targets is the fiscal deficit, and the government has succeeded in keeping this deficit within the prescribed limits. A commitment was made to bring the fiscal deficit below 4.5 percent in the financial year 2021–22, and for 2025–26, the fiscal deficit is estimated at 4.4 percent of gross domestic product (GDP).