India to Slash Spending on Food Subsidy for 800 Million People

India will spend less on a food subsidy program that feeds 800 million people after the government stopped providing some grain for free.

(Bloomberg) — India will spend less on a food subsidy program that feeds 800 million people after the government stopped providing some grain for free.

Spending will be cut to 1.97 trillion rupees ($24 billion) in the new fiscal year starting April 1 from an estimated 2.87 trillion rupees this year, according to Finance Minister Nirmala Sitharaman’s budget presentation on Wednesday. That’s still double the pre-pandemic level of about 1 trillion rupees.

The reduction in food-subsidy spending comes as the government wants to shrink its overall budget deficit — seen as key to winning a higher credit score from ratings companies and preserving investor faith in the economy.

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To reduce spending, India discontinued a pandemic-era program that provided free food grain such as wheat and rice to the poor. Although that program was very popular and credited for helping the ruling Bharatiya Janata Party win elections in some major states, it put pressure on government finances.

To avoid losing support especially ahead of polls in several states this year and the all-important general election in 2024, the government compensated by making a separate program — which was already providing highly subsidized grain — free to more than 800 million beneficiaries for a year.

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