NEW DELHI: The Centre on Tuesday sought Parliament’s approval for ₹2 trillion in net additional spending this fiscal, driven largely by higher food and fertilizer subsidies, defence revenue expenditure and transfers to reserve funds meant to cushion the economy from volatile global commodity prices amid escalating tensions in West Asia.
The net additional cash outgo amounts to a little under 0.6% of India’s nominal GDP, which was revised down to ₹345.5 trillion in the second advance estimates released last month. Economists said the scale of the supplementary demand could affect fiscal calculations for both FY26 and FY27.
The request is part of the second supplementary demands for grants tabled in Parliament, which seek approval for ₹2.81 trillion in gross additional spending, with a portion to be funded through savings under other heads.
The net additional outgo includes ₹19,423 crore in extra fertilizer subsidy, ₹23,641 crore in additional food subsidy under the PM Garib Kalyan Anna Yojana, and over ₹41,820 crore in defence services revenue expenditure.
The government has also sought approval for inter-account transfers within government totaling ₹59,085 crore in net cash outgo. These include allocations to reserve funds such as the Gold Reserve Fund under the sovereign gold bond scheme and the Economic Stabilisation Fund under the department of economic affairs.
The Economic Stabilisation Fund, introduced in the revised estimates when the government presented the FY27 budget in February, is designed as a buffer to meet unforeseen expenditure arising from volatile global conditions.
The total transfer proposed to the fund is ₹1 trillion, of which over ₹57,000 crore will involve net cash outgo, while the rest will be financed through savings, according to documents tabled in the Lok Sabha. The fund is one of three reserve funds maintained by the Department of Economic Affairs.
“The additional allocation for fertilizer subsidies may partly be due to rising above original estimation. The large size of the supplementary demands is likely to have an effect on the revised estimates for FY26 and also on the FY27 budget estimates. Going forward, these subsidies are likely to increase sharply so long as the Iran war uncertainty remains and petroleum prices remain under pressure,” said EY chief policy advisor D.K. Srivastava.
FY27 budget estimations may have been made based on certain assumptions about petroleum price and usually that assumption is around $65-70 a barrel but now the price may remain firm for a few months, if not more, and therefore, all oil price related implications will be there on the budget, which will largely translate to subsidies, explained Srivastava.
Brent crude surged as high as nearly 29% intraday to $119 a barrel on Monday before tumbling to $88.05 early on Tuesday, according to a Reuters report. It was last trading at $91.87.
Food prices tend to track the trend in energy prices given the increase in cost of transportation, added Srivastava.
In February, the government had raised the requirement for the current fiscal to ₹1.86 trillion, which has now been further increased. For FY27, the projection stands at ₹1.71 trillion.
is a key feedstock for producing urea, the most commonly used fertiliser in the country. India imports 195 million metric standard cubic meters a day (mmscmd) of gas.
Food subsidy for the current fiscal had also been raised to ₹2.28 trillion in the revised estimates in February, which has now been further enhanced. Final figures will be available in the FY28 budget documents.