Indian government considers new $ 26 billion ‘mammoth’ package to fight inflation

The Indian government is considering spending an additional 2 trillion rupees ($ 26 billion) in fiscal year 2022/23 to soothe consumers from rising prices and fight years of high inflation, two government officials told Reuters.

The new measures will be double the blow of 1 trillion. rupees that could receive government revenue from tax cuts on petrol and diesel announced by the finance minister on Saturday, both officials said.

“We are fully focused on reducing inflation. The impact of the crisis in Ukraine has been worse than we all imagined,” said one official, who did not want to be named.

The government estimates that another 500 billion Indian rupees in additional funds will be needed to subsidize fertilizers, from the current estimate of 2.15 trillion. rupees, the two officials said.

The government could also carry out another round of tax cuts on petrol and diesel if crude oil continues to rise, which could mean an additional blow of 1 to 1.5 trillion. rupees in fiscal year 2022/23 which began on April 1, the second official said.

One of the officials said that the government may need to borrow additional funds from the market to finance these measures and this could mean a deviation from its target of a deficit of 6.4% of GDP for 2022-23.

The Indian government plans to borrow a record amount of 14.31 trillion. rupees in the current financial year, according to the budget announcements made in February.

The second official said that the additional borrowing will not affect the planned April-September borrowing of 8.45 trillion. rupees and can take place in January-March 2023.