On Saturday, the finance minister announced that the reduction in taxes on petrol and diesel would result in a loss of Rs 1 lakh crore in government revenue, doubling the new system, both officials said.
India’s retail inflation hit an eight-year high in April, with wholesale inflation hitting a 17-year high, a major headache for Prime Minister Narendra Modi’s government ahead of several state assembly elections this year.
An official, speaking on condition of anonymity, said: “We are fully committed to reducing inflation. The effects of the Ukraine crisis were worse than anyone could have imagined.”
The government estimates that an additional Rs 50,000 crore will be required to subsidize fertilizers, up from the current estimate of Rs 2.15 lakh crore, two officials said.
If the price of crude oil continues to rise, the government may cut another tax on petrol and diesel, which could mean an additional blow of Rs 1 lakh crore-1.5 lakh crore in FY 2022/23 starting April 1, the second official said. Says
Both officials declined to be named because they were not authorized to disclose details.
The government did not immediately return calls seeking comment.
An official said the government may have to borrow extra money from the market to fund these measures, which could slip away from the 6.4% GDP deficit target for 2022-23.
The official did not measure the amount borrowed or the financial slippage, depending on how much funds they removed from the budget in the fiscal year.
As per the budget announcement made in February, the Indian government plans to borrow a record Rs 14.31 lakh crore in the current financial year.
Another official said the additional loan would not affect the planned April-September loan of Rs 8.45 lakh crore and could be taken in January-March 2023.