NEW DELHI – The government of India is considering spending an additional 2 trillion rupees ($26 billion) in fiscal year 2022-23 to protect consumers from rising prices and tackle multi-year high inflation, two government officials said to Reuters.
The new measures will double the Rs.1 trillion that government revenue could take from tax cuts on petrol and diesel announced by the finance minister on Saturday, both officials said. Continue reading
India’s retail inflation soared to an eight-year high in April, while wholesale inflation rose to at least a 17-year high, a major headache for Prime Minister Narendra Modi’s government ahead of multi-state elections this year.
“We are fully focused on bringing down inflation. The fallout from the Ukraine crisis has been worse than anyone can imagine,” said an official who asked not to be named.
The government estimates that another Rs.500 billion in additional funds are needed to subsidize fertilizers, up from the current estimate of Rs.2.15 trillion, the two officials said.
The government could also push through another round of tax cuts on petrol and diesel if crude oil continues to rise, which could mean an additional hit of Rs. 1 trillion to 1.5 trillion in the 2022-23 financial year beginning April 1, the second said Officer.
Both officials declined to be named because they are not authorized to reveal the details.
The government did not immediately comment outside of office hours.
One of the officials said the government may need to borrow additional sums from the market to fund these measures and this could mean a deviation from its deficit target of 6.4% of GDP for 2022-23.
The official did not quantify the amount of borrowing or budget slip and said it depends on how much money they eventually pull from the budget in the fiscal year.
According to budget announcements in February, the Indian government plans to borrow a record Rs.14.31 trillion in the current fiscal year.
The other official said the additional borrowing will not affect the planned April-September borrowing of Rs. 8.45 trillion and could be borrowed from January-March 2023.
($1 = 77.8500 Indian Rupees)
Reporting by Aftab Ahmed; Edited by Emelia Sithole-Matarise