Subsidies provided by the Gujarat government for the upcoming financial year 2024-25 is set to increase by almost 11 percent to ₹31,330 crore.

The fiscal indicators that were part of the state budget presented in the Gujarat Assembly on Friday show that the subsidy burden of the state has increased by more than five-fold since 2011-12, a year when the state’s subsidies stood at a mere ₹5,745 crore.

“Power subsidy to the agriculture sector is the largest contributor to subsidies,” states the state government. For the current financial year 2023-24, the revised estimates show that a total of ₹28,003 crore will be given as subsidies. Of this, the agriculture department with a ₹11,761 crore bill, accounts for a lion’s share of the total subsidies for the current year. According to state government officials, the subsidy burden on the state has been increasing due to assistance it extends in the form of social security including old age pension, scholarships and upliftment of the poor and marginalised. The government also provides subsidies to attract investments in the state which includes relief in electricity duty, stamp duty and assistance to MSMEs and large industries.

“Port Charges have been linked with the Wholesale Price Index (WPI) which will be subject to escalation with changes in WPI every financial year. The State Government has formulated a framework for setting bus fare charges, which has been revised from August 1, 2023, to increase bus fare by 25 per cent in all categories. This will keep the subsidy burden on Public Transport under check,” states the government about its efforts to keep the subsidies under check. For the current fiscal, the Ports and Transport department will be providing a subsidy of ₹1,367 crore which is 23 percent less than ₹1,779 crore provided in 2022-23.

The subsidies are not just restricted to farmers or the urban poor. Gujarat government in 2023-24 (till November 2023) gave away a subsidy of ₹8.83 crore to 15,100 farmers to buy smartphones. Among a host of other subsidies, the state also offers exemption in electricity duty to certain sections of the industry. Even costly power is provided at ₹1 per unit to some industrial segments.

These subsidies are being given in a state where the per capita income (at current prices) rose by 13.1 percent to ₹2.73 lakh during 2022-23. When asked if the government has been able to reign in the poverty through its policies, Professor Rasananda Panda, Professor of Economics and Management at Ahmedabad-based MICA said, “Though there has been a fall in poverty and an improvement in consumption equality, the reduction of poverty in Gujarat is still lower than that shown by other states. The poverty line is categorized as ₹26/day in urban areas. In the years 2020-21, 2021-22 and 2022-23, 1,047, 1,751 and 303 families ‘entered’ below poverty line in Gujarat while 14, 2, and 1 family ‘exited’ below poverty line. Two conclusions could be drawn from this. Firstly, COVID-19 pandemic may have impacted the citizens adversely leading to an uptick in entrance in 2021-22. Secondly, those entering are greater than those leaving, increasing the number of individuals, families under the poverty line.”

Reports suggest a strong disparity in the per capita income and those living under multidimensional poverty. In their report, NITI Aayog compares the number of individuals living under multidimensional poverty in Gujarat not being much different from that of West Bengal, a state with much lower income per capita than the former. Since the report considers more than income, it appears the other criteria are poorly addressed in the state, or a strong income disparity exists,” Professor Panda added.