The Indian government has seen a surge in subsidies due to external factors, but officials claim it won't impact the country's growth momentum. The Union budget 2026-27 had factored in such eventualities in advance, providing a cushion against global uncertainties.
The department of fertilisers has sought a 100% increase in fertiliser subsidy allocation to ₹3.42 lakh crore for 2026-27, double the budget estimate of ₹1.71 lakh crore. This is due to global supply disruptions and price volatility from the West Asia conflict, which has driven up import costs sharply.
The government has also absorbed approximately ₹1.20 lakh crore in costs to shield consumers from steeper fuel price hikes by state-run oil marketing companies over 78 days.
Despite the external pressures, the fiscal deficit target of 4.3% of GDP for 2026-27 remains intact, supported by active non-tax revenue mobilisation through disinvestment and asset monetisation.
India's GDP grew 7.7% in 2025-26, with 7.8% growth in the fourth quarter, and first-quarter output for fiscal 2027 is expected to hold at a similar level.
