Budget – Government Proposes Economic Stabilisation Fund to Strengthen India’s Fiscal Resilience
Budget – Finance Minister Nirmala Sitharaman on Friday announced that the government plans to establish an Economic Stabilisation Fund worth Rs 1 lakh crore to strengthen India’s ability to deal with global economic uncertainties. The proposed fund is expected to provide financial flexibility so the country can respond effectively to sudden international developments that could affect its economy.
Government Explains Purpose of the Stabilisation Fund
Speaking in the Lok Sabha while responding to discussions on the second batch of supplementary demands for grants, Sitharaman said the new fund would act as a financial safeguard during periods of global instability. According to her, international developments—such as the ongoing tensions in West Asia—can create unexpected pressures on economies around the world.
The Economic Stabilisation Fund is designed to serve as a buffer in such situations. By creating fiscal space, the government intends to ensure it has adequate resources available to manage shocks that may arise due to geopolitical or economic disruptions beyond India’s control.
Additional Spending Proposed in Supplementary Demands
As part of the second supplementary demands for grants, the government has requested approval from the Lok Sabha for additional expenditure of Rs 2.81 lakh crore during the current financial year. However, Sitharaman clarified that after accounting for additional receipts estimated at Rs 80,000 crore, the net extra cash outgo would amount to about Rs 2.01 lakh crore.
The finance minister emphasized that the supplementary demands are structured in a way that does not increase the overall fiscal deficit beyond what was projected earlier. The allocations are intended to address specific needs while maintaining the government’s broader fiscal discipline.
Fiscal Deficit Expected to Remain Within Target
Sitharaman reassured the House that the fiscal deficit for the financial year 2025–26 will remain within the revised estimates already presented. The government has maintained the fiscal deficit target at 4.4 percent of the country’s gross domestic product, the same level outlined in the Budget Estimates for the year.
She explained that the second supplementary demands would not push total government spending beyond the budgeted level for 2025–26. The objective, she said, is to manage spending requirements while adhering to fiscal consolidation goals.
Adjustments in Government Expenditure
Earlier in the Revised Estimates for the current fiscal year, the government reduced its total expenditure projection to Rs 49.65 lakh crore, down from Rs 50.65 lakh crore originally proposed in the Budget Estimates. This adjustment was made as part of ongoing efforts to manage public finances responsibly.
Data released by the Controller General of Accounts shows that the government had already spent Rs 36.90 lakh crore by January of the current financial year. Officials said the spending pattern remains broadly in line with fiscal planning for the year.
Key Allocations in the Supplementary Demands
Several major allocations are included in the supplementary spending proposals. The most significant provision is the Rs 1 lakh crore allocation to establish the Economic Stabilisation Fund.
Apart from this, the government has requested additional funds for key welfare and support programmes. These include Rs 19,230 crore for fertiliser subsidies aimed at supporting farmers, and Rs 23,641 crore for the Pradhan Mantri Garib Kalyan Anna Yojana, a food security initiative that provides free food grains to eligible beneficiaries.
The defence ministry is also expected to receive an additional Rs 41,822 crore under the supplementary demands. The funds will help meet operational and strategic requirements within the defence sector.
Assurance on Fertiliser Availability
During her remarks, Sitharaman also addressed concerns regarding fertiliser supply. She assured members of Parliament that the government has made adequate financial provisions to ensure there is no shortage for farmers.
According to the finance minister, the additional allocation in the supplementary demands will help maintain steady fertiliser availability during the agricultural season. She reiterated that supporting farmers remains a priority for the government’s economic planning.