Both officials said the new measures would double the 1 billion rupee hit to government revenue that the finance minister announced on Saturday from the petrol and diesel tax cuts.
Retail inflation in India rose to an eight-year high in April, while wholesale inflation rose to its highest level in at least 17 years, putting Prime Minister Narendra Modi’s government ahead of several state assembly elections this year. Headache.
“We are totally focused on reducing inflation. The impact of the Ukraine crisis is bigger than anyone imagined,” said one official, speaking on condition of anonymity.
The government estimates that additional funds of Rs 50,000 crore are needed to subsidize fertilizers, compared with the current estimate of Rs 2.15 crore, the two officials said.
If crude oil continues to rise, the government could also introduce another round of tax cuts on petrol and diesel, which could mean an increase of Rs 1 billion to Rs 1.5 billion in the 2022/23 financial year, which starts on April 1, a second official said.
Both officials declined to be named because they were not authorized to disclose details.
The government had no immediate comment outside office hours.
The government may need to borrow additional money from the market to fund the measures, one of the officials said, which could mean a dip in its 2022-23 deficit target of 6.4 percent of GDP.
The official did not quantify the amount of borrowing or the fiscal slump, saying it depends on how much money they end up diverting from the budget this fiscal year.
According to a budget announcement released in February, the Indian government plans to borrow a record 14.31 billion rupees this fiscal.
Another official said the additional borrowing would not affect the planned borrowing of Rs 845 crore in April-September and could take place in January-March 2023.