The central government is actively looking to reduce its overall subsidy bill in 2022-23. In Union Budget 2022, it is expected to cap subsidies on food and fertilizers at approx Rs 2.60 lakh crore and Rs 90,000 crore, respectively, which is lower than the revised estimates for FY22.

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Total subsidy outflow for the current financial year is around Rs 5.35-5.45 lakh crore and the Finance Ministry wants to reduce it next financial year, as reported by ET citing officials.

The fiscal deficit target for the financial year 2022-23 is expected to be at 6.5% of the gross domestic product (GDP) as compared to 6.8% of GDP in FY22, according to the glide path announced in the Budget 2021-22.

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Subsidies on food and fertilizers will be in sync with the government’s financial goals, the Economic Times reported citing officials.

The food subsidy bill for the current fiscal is expected to be around Rs 3.90 lakh crore in the revised estimates, higher than the budgeted Rs 2.43 lakh crore due to the extension of free food grains under the Pradhan Mantri Garib Kalyan Anna Yojna (PMGKAY) until March 2022 due to COVID-19 pandemic.

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Officials said that the total expense of the PMGKAY for FY22 is estimated at Rs 1.47 lakh crore. The Centre  had announced Rs 79,530 for the fertilizer subsidy in the previous budget but it had to release extra funds due to the rise in prices of fertilizers and supply-chain disruptions. The subsidy bill is expected to double to Rs 1.41 lakh crore.

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“We foresee the outlay for food subsidy at Rs 2.5 lakh crore for FY23, in our base scenario, covering the normal requirement under the National Food Security Act (NFSA),” the ET quoted Aditi Nayar, chief economist at credit rating agency ICRA, as saying.

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Until now the government has raised Rs 9,330 crore from the Rs 1.75 lakh crore target receipts from privatization in the current fiscal year. Increased tax collections have helped reduce the fiscal deficit.

Finance Minister Nirmala Sitharaman is scheduled to announce the Union Budget 2022-23 on February 1, 2022.