Strained fiscal math limits foodgrain scheme extension to solely 3 months

The authorities’s nod to increase the subsidised foodgrains programme past the September deadline — however just for three months regardless of the upcoming state polls — has been prompted by particular considerations flagged by the Finance Ministry that any extension past these three months would have meant overshooting the budgeted degree of borrowing to satisfy the incremental expenditure.

With the choice to increase the foodgrains scheme for 3 months, the Centre will find yourself spending Rs 44,762 crore incrementally for this era, which has led to specialists estimating an overshooting of the fiscal deficit to the tune of Rs 1 lakh crore.

As it’s, the federal government is looking at an extra expenditure of round Rs 2.4 lakh crore for the meals, fertilizer and cooking gasoline subsidies, which has not been accounted for within the Budget for monetary yr 2022-23.

A senior authorities official instructed The Indian Express that even with the three-month extension to the foodgrains scheme, the Centre can nonetheless keep its borrowing goal for this fiscal. “As of now, even after this decision, there are no plans to borrow more,” the official mentioned, including that, “approximately Rs 1 lakh crore would be extra for fertilizer subsidy, around Rs 1.2 lakh crore would be for food subsidy. There are other contingencies as well. So, earlier we were seeing this extra spending amount at Rs 2 lakh crore, now it could be around Rs 2.4 lakh crore.”

Experts mentioned the federal government’s fiscal headroom might be restricted. “The belief is that this number of Rs 45,000-50,000 crore (incrementally for the 3-month extension) can be managed without extra borrowing. Anything more and they will have to announce extra borrowing, despite the decent revenue trend so far,” a senior treasury official with a personal Bank mentioned.

Aditi Nayar, chief economist, ICRA, mentioned the federal government’s fiscal deficit might overshoot by round Rs 1 lakh crore. “We expect the size of the fiscal deficit overshoot to be limited to around Rs 1 trillion. We expect the fiscal deficit to modestly overshoot the budgeted level, following the extension in PMGKAY (Pradhan Mantri Garib Kalyan Anna Yojana) for another three months. Government borrowing in H2 FY23 may be slightly higher than expected,” she mentioned.

The authorities had budgeted Rs 14.31 lakh crore as borrowing for this fiscal. As per the borrowing calendar, it deliberate to boost Rs 8.45 lakh crore within the first half of FY23 and the stability within the second half of the fiscal.

In the Budget, fertilizer subsidy was estimated at Rs 1.05 lakh crore, meals subsidy at Rs 2.06 lakh crore and petroleum subsidy at Rs 5,831 crore. The expense on subsides has risen within the aftermath of the rise in world commodity costs following the Russia-Ukraine warfare. The authorities’s fiscal deficit is budgeted to be 6.4 per cent of the GDP or at Rs 16.61 lakh crore for FY23.