India will spend an additional $26 billion to combat inflation: Report

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• May 22, 2022 | Sourav Boruah

 Digital Desk: In the fiscal year
2022/23, the Indian government is considering spending an additional 2 trillion
rupees ($26 billion) to protect consumers from rising costs and combat
multi-year high inflation.

The additional measures will more than triple the 1 trillion
rupee impact to government revenues that tax cuts on gasoline and diesel
announced by the finance minister on Saturday, according to both sources.

In April, retail inflation in India reached an eight-year high,
while wholesale inflation reached at least a 17-year high, providing a big
challenge for Prime Minister Narendra Modi's government ahead of state assembly
elections this year.

"We are entirely focused on lowering inflation. The
consequences of the Ukraine conflict were far worse than anyone could have
predicted "According to one official who did not want to be identified,

According to the two officials, the government expects that
another 500 billion Indian rupees will be required to support fertilizers, up
from the present estimate of 2.15 trillion rupees.

If crude oil prices continue to climb, the government may
implement another round of tax cuts on gasoline and diesel, costing the
government an additional 1 trillion to 1.5 trillion rupees in the fiscal year
that began on April 1, according to the second official.

Both officials declined to be identified because they are
not authorized to discuss the information.

Outside of business hours, the administration did not
respond.

According to one of the officials, the government may need
to borrow more funds from the market to support these measures, which could
result in a deviation from the 6.4 percent of GDP deficit target for 2022-23.

The amount of borrowing or fiscal slippage, according to the
official, is dependent on how much money is diverted from the budget over the
fiscal year.

According to budget announcements made in February, the
Indian government aims to borrow a record 14.31 trillion rupees this fiscal
year.

According to the other official, further borrowing will
not be necessary.