Government To Spend Additional Rs 2 Lakh Crores To Contain Inflation: Report

On Saturday, Finance Minister Nirmala Sitharaman announced excise duty cuts on petrol and diesel, which could hit the government revenues by Rs 1 lakh crore

New Delhi: The Centre is planning to spend an additional Rs 2 lakh crores ($26 billion) in the current fiscal year to safeguard consumers from rising prices and fight multi-year high inflation, quoting two government officials Reuters reported on Monday.

On Saturday, Finance Minister Nirmala Sitharaman announced excise duty cuts on petrol and diesel, which could hit the government revenues by Rs 1 lakh crore.  

Retail inflation in India soared to an eight-year high in April, while wholesale inflation rose to at least a 17-year high, causing a major headache for the government ahead of elections in several state assemblies this year.

"We are fully focussed on bringing down inflation. The impact of Ukraine crisis was worse than anyone's imagination," said one official, who did not want to be identified.

According to government estimates, another Rs 50,000 crore additional funds will be needed to subsidise fertilisers, from the current estimate of Rs 2.15 lakh crore, the two officials said.

The report mentioned that the government could go for another round of tax cuts on petrol and diesel if crude oil continues to rise which means another hit of Rs 1 lakh crore – Rs 1.5 lakh crore in FY22-23 started on April 1, the second official said.

The government, however, did not immediately respond to Reuters’ request seeking comment on the issue.

According to the report, one of the officials said the Centre may need to borrow additional sums from the market to fund these measures and that could mean a slippage from its deficit target of 6.4 per cent of GDP for FY22-23.

The official did not quantify the amount of borrowing or fiscal slippage saying it depended on how much funds they eventually divert from the budget in the fiscal year.

According to Budget announcements on February 1, the government plans to borrow a record Rs 14.31 lakh crore in the current fiscal year. The additional borrowing will not impact the planned April-September borrowing of Rs 8.45 lakh crore and may be undertaken in January-March 2023, another official added.