Lok Sabha Told of New Economic Stabilisation Fund to Help India Tackle Global Shocks

Union Finance Minister Nirmala Sitharaman on Friday informed the Lok Sabha that the government has created an Economic Stabilisation Fund to strengthen the country’s ability to respond to global economic disruptions and geopolitical uncertainties.

Speaking during a discussion on supplementary demands for grants, Sitharaman said the proposed fund is intended to provide the Centre with additional fiscal flexibility when faced with sudden international shocks that could affect India’s economy. She explained that the mechanism would enable the government to respond swiftly to external developments such as fluctuations in commodity prices, disruptions in global supply chains, or escalating geopolitical tensions.

The Finance Minister highlighted that the global economic environment has become increasingly volatile, with conflicts, trade uncertainties and shifts in energy markets posing risks to many countries. In such circumstances, she said, it is important for India to have a financial buffer that allows the government to take timely measures to maintain stability and protect domestic growth.

According to Sitharaman, the Economic Stabilisation Fund will serve as a strategic financial tool that can be used whenever global events threaten to disturb India’s economic momentum. It is expected to give the government greater fiscal headroom to intervene when necessary, ensuring that critical sectors and welfare programmes are not adversely affected by sudden economic shocks.

The announcement was made while the government sought parliamentary approval for additional expenditure during the ongoing financial year. The supplementary demands for grants include allocations aimed at meeting urgent financial requirements across various sectors. Sitharaman told the House that despite the additional spending, the government remains committed to maintaining fiscal discipline and keeping the fiscal deficit within the limits outlined in the Budget.

She also noted that international developments have had direct and indirect impacts on India’s economy in recent years. Issues such as volatility in crude oil prices, supply disruptions in essential commodities, and disturbances in global trade routes can influence domestic inflation, production costs and government spending priorities.

In this context, the Economic Stabilisation Fund is expected to provide policymakers with a mechanism to respond quickly to emerging challenges while ensuring that key subsidies and developmental programmes continue without disruption. The Finance Minister emphasised that the government’s objective is to enhance India’s economic resilience and ensure that the country remains prepared for unforeseen global developments. The creation of the stabilisation fund, she said, reflects a proactive approach to managing external risks while sustaining India’s long-term growth trajectory.