Rs 1L-cr economic stabilisation fund to tackle global headwinds

New Delhi: The Union government proposes to set up a Rs 1 lakh-crore Economic Stabilisation Fund that would give fiscal headroom for the country in dealing with global economic headwinds such as the ongoing West Asia crisis, Union Finance Minister Nirmala Sitharaman told Parliament on Friday.

As part of supplementary demands for grants, the government has sought Parliament’s approval for Rs 57,381.84 crore to be used for the proposed fund. The remaining amount will be met through savings from other ministries and departments.

"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," Sitharaman said in the Lok Sabha.

The external headwinds have a significant impact on the Indian economy. The ongoing US-Israel-Iran war has pushed oil prices higher, which is likely to widen India’s import bill and result in higher inflation and low economic growth.

The finance minister said the Fund would help India effectively manage external shocks. 

Responding to discussion on the second batch of supplementary demands for grants in the Lower House, Sitharaman said the government is hopeful of meeting the 4.4% fiscal deficit target in the current financial year, as proposed in the budget.

This is despite Rs 2.01 lakh crore of additional spending sought under the second supplementary demands for grants. "There is no increase in expenditure beyond the BE of 2025-26 due to the second supplementary," she said.

Rejecting the Opposition charge that bringing supplementary demands for grants shows "poor budgeting" by the government, Sitharaman termed it "flawed logic" and asked whether the government should not have brought the Fund in times of unforeseen challenges.

She said that when the world is facing a crisis, it is necessary for all political parties to rise above party lines and support the government.

The proposal was passed in the Lok Sabha through a voice vote amid frequent disruptions and sloganeering by Opposition members over LPG price hike and shortage.

(With PTI inputs)