Economists are predicting lower food subsidy bills for the central government in the upcoming year as the Center has withdrawn the free foodgrain scheme PMGKAY. The scheme was brought during the Covid-19 pandemic and cost close to Rs 4 lakh crore over and above the regular food subsidy bill under National Food Security Act (NFSA).
Several economists have told Moneycontrol that the government has set the stage for lowering its food subsidy outgo in the next financial year. According to QuantEco Research economist Yuvika Singhal, beginning April 1, the food subsidy outgo should fall to Rs 2.1 lakh crore, in line with the government’s estimates.
Union Finance Minister Nirmala Sitharaman will table Budget 2023 on February 1. The Budget will also contain receipts of the government's estimated spending for the next fiscal year.
Following the Covid-19 pandemic, the government brought free foodgrain schemes for the economically weaker sections of society. This resulted in an increase in the Center's food subsidy bill. PMGKAY scheme was over and above the subsidised food grains that eligible residents purchase under the National Food Security Act. The programme provided an additional 5 kg of food grain to about 81.3 crore recipients free of charge.
On December 23, the cabinet decided to provide free foodgrains to about 81.35 crore beneficiaries under the NFSA for one year from January 1, 2023. Simultaneously, it ended the PMGKAY.
Nomura’s chief economist for India and Asia (excluding Japan) Sonal Varms told MoneyContral, “The reorientation of the food subsidy programme makes for lower fiscal, inflation and political risks.”
She said that since its inception in April 2020, PMGKAY had cost the exchequer close to Rs 4 lakh crore over and above the regular food subsidy bill. The food subsidy bill was Rs 5.41 lakh crore in FY21 and Rs 2.86 lakh crore in FY22.
Nomura estimates that for FY23, the food subsidy outgo to rise to Rs 2.87 lakh crore against the budget estimate of Rs 2.07 lakh crore. It also expects the food subsidy for FY24 may be up to Rs 2.3 lakh crore.
Minister of Consumer Affairs, Food, and Public Distribution Piyush Goyal had said that the Centre will spend more than Rs 2 lakh crore from January to December 2023 on food subsidies under NFSA and other welfare schemes.
Yuvika Singhal says, “Apart from fiscal savings, bringing an end to PMGKAY was becoming inevitable as stocks of both wheat and rice have depleted considerably in the last one year by about 50 per cent and 45 per cent, respectively. While stocks of rice remain above buffer norms, those of wheat continue to hang precariously close to buffer norms as of December 2022.”