Union Government has proposed a ₹1 lakh crore Economic Stabilisation Fund (ESF) to enhance the country’s resilience against global economic shocks and “headwinds”. It was announced by Finance Minister Nirmala Sitharaman in the Lok Sabha during the second part of the Budget Session 2026-27. This fund will act as a fiscal buffer to manage crises such as high crude oil prices, energy shortages, and supply chain disruptions.
Key Features of ESF
- Primary Objective: To provide “fiscal headroom,” allowing the government to absorb external shocks- such as energy shocks and supply chain disruptions arising from conflicts in West Asia- without deviating from the 4.4% fiscal deficit target for FY26.
- Total Corpus: ₹1 lakh crore.
- Funding Structure:
- ₹57,381 crore allocated via the Second Supplementary Demand for Grants (net cash outgo).
- ₹42,619 crore (approx. 43,000 crore) met through internal savings from various ministries and departments.
- Management: It will be managed by the Department of Economic Affairs (DEA) under the Ministry of Finance.
Purpose and Significance
The fund is designed to protect domestic growth and consumer prices from volatile international markets:
- Shock Absorber: Mitigates the impact of “black swan” events, such as disruptions in the Strait of Hormuz affecting LPG and crude oil imports.
- Counter-Cyclical Tool: Sequesters money during periods of robust growth to be used during volatility in commodity markets.
- Inflation Control: Helps the government absorb the cost of global price hikes, preventing them from being passed on to domestic consumers.
- Sector Support: Specifically targets unanticipated disruptions to sub-sectors of the Indian economy, ensuring that essential welfare and development spending remains unaffected by external crises.