India proposes $6.2 bln stabilisation fund to cushion economic shocks

New Delhi— Nirmala Sitharaman, finance minister of India, on Friday proposed the creation of a 573-billion-rupee ($6.20 billion) economic stabilisation fund in parliament aimed at providing fiscal space for the government to respond to global economic headwinds and unexpected shocks.

Sitharaman said the proposed fund would help the government address disruptions such as supply chain interruptions and sudden economic stresses while maintaining stability in public finances.

The stabilisation fund is intended to provide the government with additional fiscal headroom during periods of volatility in global markets or trade flows, Sitharaman told lawmakers.The proposal comes as the government seeks parliamentary approval for gross additional spending of 2.81 trillion rupees.

According to Sitharaman, part of the additional expenditure will be offset by savings and higher receipts from various ministries and departments.She said the proposed spending adjustments would not increase the government’s overall expenditure beyond the levels outlined in the federal budget.

Sitharaman also proposed additional fertiliser subsidies amounting to about 192.30 billion rupees to cover higher spending under the nutrient-based subsidy policy and payments for urea subsidies.

India’s fertiliser subsidy bill has come under pressure following disruptions to supply routes linked to tensions involving Iran, particularly around the Strait of Hormuz, a key corridor for global fertiliser shipments.

The disruption has pushed up prices for crop nutrients such as urea and ammonia, increasing import costs for major buyers including India.

Sitharaman said the government would ensure there was no shortfall in funds for fertiliser subsidies for farmers.