The Indian government is considering spending an additional Rs 2 trillion ($26 billion) in the 2022/23 fiscal year to cushion consumers from rising pricing and fight high inflation, two government officials said.
The new measures will be double the Rs 1 trillion hits government revenues could take from tax cuts on petrol and diesel Finance Minister Nirmala Sitharaman declared a number of measures to tackle inflation in the country.
Nirmala Sitharaman Tweets:
Today, the world is passing through difficult times. Even as the world is recovering from the Covid-19 pandemic, the Ukraine conflict has brought in supply chain problems and shortages of various goods. This is resulting in inflation & economic distress in a lot of countries.
— Nirmala Sitharaman (@nsitharaman) May 21, 2022
The government has taken measures to reduce the excise duty & taxes on petrol by Rs 8 per litre and diesel by Rs 6 per litre. The price of petrol will be reduced by Rs 9.5 per litre and diesel by Rs 7 per litre.
With a fertilizer subsidy of over Rs 1 lakh crore, the government will offer Rs1.1 lakh crore to farmers.
The Center will give a subsidy of Rs 200 on gas cylinders up to 12 cylinders to 9 crore heirs and it'll have a profit charge of further than Rs 6000 crore in a year.
The customs duty & levies on raw accoutrements and moderators for plastic products will be reduced and the customs duty on raw stuff and interposers for iron and steel will be acclimated to reduce their cost in the country.
Import duty on some steel raw materials of steel will be reduced and import of some steel raw stuff will be expanded.
Measures and ways were being taken to make cement more available and the cost of cement will be reduced.
What Government sources said :
The Indian government plans to borrow a record Rs 14.31 lakh crore in the current fiscal year, according to the budget which was declared in February 2022.
The government estimates another 500 billion Indian rupees additional funds will be needed to subsidise fertilisers, from the current estimate of 2.15 trillion rupees, the two officials said.
The government could also deliver another round of tax cuts on petrol and diesel if crude oil continues to rise which could mean an added hit of 1 trillion-1.5 trillion rupees in the 2022/23 fiscal year starting on April 1, the second official said.
One of the officials said the government may need to borrow extra sums from the market to fund these measures and that could mean shortages from its deficit target of 6.4% of Gross domestic product for 2022-23.
The official did not confirm the amount of borrowing or fiscal slippage saying it depended on how much funds they eventually divert from the budget in the fiscal year.
The other official said the additional borrowing will not affect the planned April-September borrowing of Rs 8.45 trillion and may be undertaken in January-March 2023.