FM Sitharaman proposes Economic Stabilisation Fund amid West Asia crisis

Union Finance Minister Nirmala Sitharaman on Friday proposed setting
up of an Economic Stabilisation Fund amid the ongoing West Asia
crisis.

Speaking in Parliament, the Finance Minister said the aim of this fund
should be to create fiscal headroom, enabling India to respond more
effectively to global economic headwinds.

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Responding to the discussion on the second batch of supplementary
demands for grants in Lok Sabha, Sitharaman said, “I would like to
highlight that the proposed Economic Stabilisation Fund will provide
fiscal headroom, allowing India to respond to global headwinds such as
recent crises, unanticipated supply chain disruptions, unexpected
shocks to sub-sectors of the Indian economy, and any other events that
may have significant fiscal implications. In anticipation of what
cannot be foreseen, we are coming up with economic stabilisation
measures”.

“The fiscal deficit for FY26 will remain within the Revised Estimates
(RE), which projects it at 4.4% of GDP, the same level as the Budget
Estimates (BE) for the year,” she said.

“There is no increase in expenditure beyond the BE of 2025–26 due to
the second supplementary,” she said.

The supplementary demands seek Parliament’s approval for gross
additional expenditure of over Rs 2.81 trillion for the financial year
2025–26 (FY26). As part of the demands, the finance ministry has also
sought Rs 57,381.84 crore for the Economic Stabilisation Fund. The
proposal of the fund comes amid an energy supply crunch due to the
West Asia conflict.

As per the information shared by the Finance Ministry, the
supplementary demands involve a net cash outgo of Rs 2.01 trillion.

“The gross additional spending will be matched by savings of Rs
80,145.71 crore across ministries and departments or by enhanced
receipts and recoveries,” the ministry said.

Further, the additional spending includes Rs 15,000 crore for the
nutrient-based subsidy scheme under the Department of Fertilisers and
Rs 23,640 crore for subsidy support under the development action plan
of the Pradhan Mantri Garib Kalyan Anna Yojana.

The finance ministry has also sought an additional Rs 3,788 crore to
meet subsidy requirements under the interest equalisation support for
lines of credit provided through the Indian Development and Economic
Assistance Scheme.

According to the Controller General of Accounts (CGA) data, till
January, the government had spent Rs 36.90 lakh crore.