Food security and fertilizers remain the government’s top priority even as subsidies on fuel and fertilizers are likely to rise due to external factors, senior officials said on Tuesday, adding that this will not impact India’s growth momentum as the Union Budget 2026-27 has taken into account such eventualities in advance.
The Fertilizers Directorate seeks a 100% increase in fertilizer subsidy allocations to approximately 100% $3.42 lakh crore for 2026-27 – double the budget estimate of Rs $1.71 lakh crore – as global supply disruptions and price volatility due to conflict in West Asia have led to import costs rising sharply. Besides this, the government absorbed approx $It costs Rs 1.20 lakh crore to protect consumers from sharp fuel price hikes by state-run oil marketing companies over a period of 78 days, said an official, requesting anonymity.
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The increase in the cost of fertilizers is shown in terms of each unit. “We supply fertilizers to our farmers across the country $300 per bag while our import cost per bag has increased by approx $3000. The subsidy per bag is now about $“2,700,” the official said, adding that the government is working to increase local production capacity to reduce dependence on imports.
India imports fertilizer in large quantities, the bulk of which is represented by suppliers in West Asia, the Gulf, and North Africa – most of which passes through the Strait of Hormuz, which is now disrupted by conflict.
The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman on February 1, was prepared at a time when economies were already facing headwinds due to uncertainty over tariffs severely impacting global supply chains, and was designed with room for more external shocks.
Beyond the fertilizer subsidy line, the budget was presented $2.27 million crores for food support and $Rs 12,084.51 crore for cooking gas subsidy. It also established an economic stabilization fund with a proposed group of $1 lakh crore – with $Rs 50,000 crore has been allocated in the revised estimates for 2025-26 – separate from the price stabilization fund of $Rs 4,100 crore to cover buffer stock of pulses, onions and potatoes. “The matter has been well thought out, taking into account the global uncertainty,” the official said.
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on fuel, $1.20 lakh crore government exports including reduction in customs duties $10 per liter of petrol and diesel was announced on March 27 – a move that almost costs the exchequer $14,000 crore per month – plus other support to oil marketing companies to make up for the growing shortfall in recovery during the 78-day price freeze.
Despite external pressures, the official said that the fiscal deficit target of 4.3% of GDP for the period 2026-2027 remains in place, supported by active mobilization of non-tax revenues through divestment and asset monetization, with the aim of $80,000 Crores.
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India’s GDP grew by 7.7% in 2025-26, with 7.8% growth in the fourth quarter, and first-quarter output for fiscal 2027 is expected to remain at a similar level.
Domestic consumption continues to drive the economy, El Nino and the threat of a weak monsoon remain emergency threats, and the picture is expected to become clearer by August. “Hence, the government will remain on the reform path and will not back down from its FY27 capital expenditure plans,” the official said.
In a coordinated response to currency pressures, the Finance Ministry on Friday announced measures to expand investment options for foreign portfolio investors in Indian stocks and make government bonds more attractive through tax concessions.
The Reserve Bank of India has provided hedging cost support for external commercial loans to boost foreign exchange inflows. The rupee appreciated by 56 paise on Friday to close at $95.18 per dollar.
