The five-year extension to the provision of free foodgrain under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) has not hurt the government's medium-term fiscal consolidation roadmap, Finance Secretary TV Somanathan has said.
"The announcement on the PM Garib Kalyan Anna Yojana does not by itself mean anything for our fiscal consolidation path," Somanathan told reporters on November 30.
Also Read: India's April-October fiscal deficit at Rs 8.04 lakh crore, 45% of FY24 target
"We are still committed to that path. That decision does not throw us off that path," he added.
The Centre is looking to reduce its fiscal deficit to 4.5 percent of GDP by 2025-26.
Somanathan's comments come after the Cabinet, on November 29, approved the government's proposal to extend the PMGKAY for five more years starting January 1, 2024. As per the government's calculations, the five-year extension will set it back by around Rs 11.8 lakh crore.
Prime Minister Narendra Modi had announced the extension of the scheme in Durg in poll-bound Chhattisgarh on November 4.
The new avatar of the PMGKAY was first announced in December 2022. Under this version of the scheme, free foodgrains would be provided to around 81 crore poor Indians under the National Food Security Act. This replaced the original free foodgrain scheme, which was launched early in the coronavirus pandemic to provide relief to the poor.
The burgeoning expenditure on account of the original PMGKAY led to the government to announce free foodgrain under the National Food Security Act, which already provided subsidised foodgrain via the Public Distribution System. As such, the new version of the scheme came at a lower cost to the exchequer.
Somanathan also expressed confidence about the Centre's ability to meet its fiscal deficit for the current financial year despite the ongoing state elections and the upcoming Lok Sabha elections, with speculation that the government spending may rise in the coming months to woo voters. However, the finance secretary rejected suggestions that the polls may throw a spanner in the finance ministry's fiscal math.
"It's not a snap election. We knew it was an election year when we started (the year)," he said.
"Nothing has happened so far to change the assumption that we will end this year with a fiscal deficit of approximately 5.9 percent of GDP. I am confident, as of today, that we will adhere to our fiscal targets," Somanathan added.
According to data released earlier today on November 30, the central government's fiscal deficit widened to Rs 8.04 lakh crore in April-October, accounting for 45.0 percent of the full-year target. Economists see a low risk of the fiscal deficit target being exceeded.
"After considering the additional economic cost towards the extension of free foodgrains under the National Food Security Act for January-March 2024, the higher subsidy on LPG, the nutrient-based subsidy rates on P&K fertilisers for the ongoing rabi season, and the additional amount likely to be required for MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme), we estimate spending to exceed the 2023-24 Budget Estimate by Rs 0.8-1.0 lakh crore," Aditi Nayar, chief economist at ICRA, said.
"However, this sum could be matched by expenditure savings, which have ranged between an estimated Rs 1.1-2.3 lakh crore in recent years. As a result, we foresee a low risk of the fiscal deficit target of 5.9 percent of GDP being breached," Nayar added.
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