India has proposed the creation of a ₹57,381 crore Economic Stabilisation Fund to strengthen the country’s ability to respond to global economic shocks, Finance Minister Nirmala Sitharaman announced in Parliament on Friday.
The proposed fund is designed to provide fiscal headroom for the government to address global headwinds, including supply chain disruptions, economic shocks and sudden crises affecting different sectors of the Indian economy. The proposal comes at a time of heightened global uncertainty, including rising oil prices and disruptions in key trade corridors linked to tensions in West Asia.
Speaking during the debate on the Second Supplementary Demand for Grants in the Lok Sabha, Sitharaman said the fund would enable India to respond quickly to unexpected developments that could have significant fiscal implications.
Fund Designed to Cushion Economic Shocks
The Finance Minister explained that the Economic Stabilisation Fund would help the government deal with unanticipated supply chain disruptions and unexpected shocks that could affect economic activity. These challenges include crises that may impact specific sectors or broader macroeconomic stability.
The initiative comes amid concerns over global energy markets, where oil prices have surged close to $100 per barrel. The volatility has been driven by the ongoing conflict in West Asia, which has also raised fears of energy shortages and logistical disruptions in global trade routes.
Sitharaman noted that the stabilisation fund would act as a financial buffer, allowing the government to respond swiftly without derailing its broader fiscal consolidation plans.
Parliament Clears Additional Spending
Alongside the fund proposal, the government sought parliamentary approval for additional expenditure amounting to ₹2.81 lakh crore during the current financial year.
However, the Finance Minister clarified that the overall fiscal position would remain intact. A portion of the additional spending will be offset by savings and higher receipts from various ministries and departments.
After accounting for additional receipts estimated at ₹80,000 crore, the net additional cash outgo for the government is expected to stand at ₹2.01 lakh crore.
The Lok Sabha approved the supplementary demand, which includes the allocation for the Economic Stabilisation Fund.
Fiscal Deficit Target to Remain Intact
Sitharaman assured Parliament that the fresh spending would not lead to a breach of the government’s fiscal deficit target for the financial year 2025–26.
In her Union Budget presentation earlier this year, the government had set a fiscal deficit target of 4.4 percent of India’s Gross Domestic Product.
Reiterating the government’s commitment, the Finance Minister said the additional allocations, including technical and cash supplementaries, would remain within the fiscal deficit framework presented to Parliament on February 1, 2026.
She emphasised that the government’s macroeconomic management after the COVID-19 pandemic had strengthened the country’s economic framework and helped India recover strongly. These policy measures, she said, have enabled the economy to absorb external shocks without deviating from the fiscal consolidation roadmap.
Additional Costs Add Pressure
The government is also proposing additional fertiliser subsidies worth about ₹192.30 billion to meet higher spending under the nutrient-based subsidy policy and urea subsidy payments.
India’s fertiliser subsidy bill has come under pressure due to disruptions in global supply routes following the West Asia conflict. Shipping through the Strait of Hormuz, a critical corridor for global fertiliser shipments, has been affected, pushing up prices of key crop nutrients such as urea and ammonia.
The rising import costs have created financial pressure for large fertiliser-importing countries such as India.
Despite these challenges, Sitharaman assured lawmakers that there would be no shortage of funds for fertiliser subsidies for farmers, underlining the government’s commitment to protecting agricultural support systems during a period of global uncertainty.