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The Indian government is reportedly planning to spend around USD 26 billion more in the FY 2022-23 to ease rising price pressure on consumers as well as fight multi-year high inflation. The government revenue hit from tax cuts on diesel and petrol is expected to result in an additional USD 13.33 billion of borrowing, sources claimed.
India’s wholesale inflation spiked up to a 17-year high while the retail inflation rose to an 8-year high in April posing a threat for PM Narendra Modi’s government just before elections to several state assemblies.
It appears that India is fully focused on bringing down the inflation rate as the Ukraine crisis impact turned out to be worse than anybody’s imagination. According to government predictions, additional funds of around USD 6 billion are required to subsidize fertilizers from the current estimate of USD 27 billion.
Moreover, the Indian government is also planning to deliver a second round of fuel tax cuts if crude oil continues to rise which could also signify an added hit of around USD 14.81 billion in FY 2022-23.
Another source stated that the Indian government might require to borrow additional sums from the market to fund these measures which could also lead to slithering down from achieving its deficit target of about 6.4% of GDP for FY 2022-23.
Meanwhile, the Indian government plans to borrow around USD 184 billion during FY 2022-23. The additional borrowings will not impact the planned April-September financing of USD 108 billion and might take place in the first quarter of 2023, sources claimed.
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