Government’s Budgetary Shift: The Evolution of Food Subsidies in India


The recent budgetary decisions by the government reflect a significant shift in priorities, particularly in the allocation of subsidies for essential commodities. One notable change is the reduction in the allocation for urea and nutrient-based subsidies, while maintaining the outlay for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). However, the spotlight is on the substantial budget allocation of Rs 2.05 lakh crore for the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).

Initially introduced as a short-term measure in response to the Covid-19 outbreak, the PMGKAY has undergone multiple extensions. In a crucial decision last November, the Cabinet led by Prime Minister Narendra Modi extended the scheme for a five-year period starting from January 1, 2024. This extension comes with an estimated cost of Rs 11.80 lakh crore over the five-year duration, making it the top-funded among the government’s 170-odd schemes.

The PMGKAY primarily caters to ration cardholders under the National Food Security Act, 2013 (NFSA). The NFSA, originally introduced by the Congress-led UPA government, aimed to provide subsidised foodgrains to the vulnerable sections of society. With the extension of PMGKAY as a five-year scheme, the government has chosen to merge the NFSA with it.

About Government’s Budgetary Shift:

A notable implication of this merger is the consolidation of food subsidies to the Food Corporation of India (FCI) under the PMGKAY umbrella. In the budget for 2023-24, the food subsidy to FCI under the NFSA was approximately Rs 1.97 lakh crore. This marks a crucial step in streamlining subsidy mechanisms, potentially enhancing efficiency in the distribution of essential commodities.

As the PMGKAY takes center stage in the government’s welfare initiatives, it not only addresses immediate food security concerns but also aligns with the broader objective of uplifting the socio-economic status of vulnerable populations. The extension of this scheme for a substantial five-year period underscores the government’s commitment to long-term sustainable solutions for food distribution and security.

While the reduction in urea and nutrient-based subsidies raises questions about the agricultural sector, the unchanged outlay for MGNREGA indicates a sustained focus on rural employment generation. These budgetary decisions collectively signal a nuanced approach to addressing diverse challenges facing the country, ranging from agricultural sustainability to socio-economic empowerment at the grassroots level.

The evolution of food subsidies in India reflects a strategic balancing act by the government. The substantial allocation to PMGKAY, coupled with the merger of NFSA, highlights a commitment to providing essential resources to those in need. As the country navigates complex economic landscapes and strives for inclusive growth, these budgetary decisions become crucial markers of policy direction.