Economic Reforms
Government is pursuing aggressive reforms, termed as “Reform Express,” targeting areas such as income tax, GST, and job guarantee schemes, alongside concluding free trade agreements (FTAs). These measures are a response to global economic challenges, including tariff changes from the US, and have led to optimistic projections for India's economic growth.
Economic Growth and Challenges
- The Indian economy is projected to grow at 7.4% in FY26.
- Consumer inflation decreased to 1.3% in December 2025.
- Trade deal uncertainties with the USA could impact future performance.
Agri-Food Sector Issues
Despite reforms, the agri-food sector faces challenges, with agri-GDP growth expected to drop to 3.1% in FY26 from 4.6% in FY25. Low consumer price inflation is partly due to a collapse in certain food prices.
- Onion prices decreased by 48%, potatoes by 35%, and major pulses below MSP by 10-30%.
- Government subsidies favor water and fertilizer-intensive crops, causing imbalance.
Food and Fertilizer Subsidy Reforms
The government needs to address inefficiencies in food and fertilizer subsidies, which together constitute about 8-8.5% of the budget.
- Food Subsidy: Costs the government Rs 2.25 trillion, covering 56% of the population with free food under schemes like PM Garib Kalyan Yojana. Suggested reforms include reducing coverage and promoting direct cash transfers.
- Fertilizer Subsidy: Rs 2 trillion in subsidies, larger than the Ministry of Agriculture's budget, with issues of imbalance in urea usage causing environmental damage. Suggested reforms include direct cash transfers and shifting subsidy management to MoAFW.
Potential Reforms and Suggestions
- Gradually reduce food subsidy coverage from 56% to 15% of the population.
- Convert a portion of fair price shops into nutrition hubs offering diverse food items.
- Integrate food and fertilizer subsidies with existing schemes like PM Kisan for better efficiency.
