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Context:
The Government of India has announced a ₹57,381 crore allocation for the Economic Stabilisation Fund to tackle global uncertainties such as the West Asia conflict, oil price volatility, and supply chain disruptions.
What is the Economic Stabilisation Fund?
- A special fiscal mechanism created by the Ministry of Finance
- Designed to:
- Provide financial buffer during economic shocks
- Ensure stability without disrupting the Union Budget
Objective
- Protect the Indian economy from:
- Oil price shocks (e.g., $100/barrel scenarios)
- Energy shortages
- Global supply chain disruptions
- Geopolitical conflicts
How the Fund Works
- Allocated through Supplementary Demands for Grants
- Funds used to:
- Meet unexpected expenditure needs
- Managed alongside:
- Additional government receipts
- Ensures:
- Fiscal deficit target remains intact (around 4% of GDP for FY26)
Key Features
1. Fiscal Headroom
- Enables quick government spending during crises
- Avoids delays in emergency response
2. Targeted Intervention
- Focus on sectors impacted by:
- External shocks
- Supply disruptions
3. Deficit Neutrality
- Spending designed to not breach fiscal deficit targets
4. Macroeconomic Stability
- Acts as a shock absorber for the economy
5. Large Allocation
- ₹57,381 crore corpus
- Part of ₹2.01 lakh crore additional spending approved
