Indian government considers additional jumbo spending to recover its national inflation for as much as $26bn in the 2022/23 fiscal year. The media said the funding allocation is to handle consumers from rising prices and battle multi-year high inflation. This funding would hit government revenues taking from tax cuts on petrol and diesel.
The country’s retail inflation rose to an eight-year high in April. The wholesale inflation on the other hand, rose to at least a 17-year high. The government said that they are going to fully focus on stabilizing inflation. The impact of the Ukraine invasion has contributed to the unimaginable crisis the world must face.
The government predicts that it would take another Rs 50.000 crore of additional funds. This allocation is to subsidize fertilizers. The current estimate is Rs. 2.15 lakh, said the officials. Worse, the government could also allow another round of tax cuts on petrol and diesel. It could happen if crude oil remains high. In other words, the government needs an additional hit of 1 lakh crore to 1.5 lakh crore of $26bn in the 2022/23 fiscal year.
The government may need to borrow additional funds from the market to cover these measures. In other words, it could lead to a slippage of the country’s deficit target of 6.4% of GDP. The official however, did not evaluate the total of borrowing or fiscal slippage. They said that the value depends on how much funds they eventually divert from the budget in the fiscal year.
The government estimates that it might need to borrow as much as Rs 14.31 lakh crore. This is based on the budget announcement in February this year. This borrowing, said another official, would not impact the planned April-September borrowing.
