Centre's subsidy bill

How large is the central government's subsidy bill? The latest budget papers show a figure of Rs 66, 537 crore. Fertiliser and food subsidies acount for Rs 32,000 crore and Rs 31,000 crore respectively. Then, there are petroleum, interest and other subsidies.

In addition to these figures, the budget shows off-balance sheet bonds on account of over Rs 18,000 crore. This is just 0.3% of GDP. According to the Economic Survey, subsidies as a proportion of GDP have been declining over the years- they have come down from 1.7% of GDP in 2002-03 to 1.1% in 2007-08. Add the 0.3% of off-balance sheet subsidies to the figure of 2007-08 and it is 1.4% - still lower than the figure of 2002-03. So, it does appear that even if the absolute amounts of subsidy are going up, as a proportion of GDP, subsidies have, in fact, been contained.

The fly in the ointment is the estimate of off-balance sheet subsidies. The PM's Economic Advisory Council estimates off-balance sheet bonds on account of subsidies at 2% of GDP, way above the government's figure of 0.3% of GDP. The IMF had estimated at 1.2% of GDP.

The differences arise because the government has not met its subsidy commitments in full. But these commitments have to be met and we should expect more issuance of bonds. If we add the EAC's estimate of 2% of GDP to the figure shown in the budget, the total cost comes to nearly Rs 3.2% of GDP. That would be a significant increase over the level of subsidies in earlier years.

We need some clarity on the total amount of subsidies- in the budget and outside it.