There is unlikely to be any major impact on the fiscal deficit on account of the extension of the free food grain plan, a senior government official said, adding that there are no significant fiscal implications for FY24 as well as FY25.
Prime Minister Narendra Modi on November 4 said that India is planning to extend its free food grains programme by five years. This announcement comes ahead of general elections scheduled to be held around April or May 2024.
The free food grain scheme known as the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) allows eligible citizens to purchase 5 kg of food grains per person per month at highly subsidised prices.
Another government official said that the Union government is committed to meeting the fiscal deficit target of 5.9 percent of the GDP in the current financial year. The official further said that volatile global oil prices remain a key challenge for the economy.
Oil markets have been on edge of late on fears of the conflict between Israel and Hamas widening to a regional one, thereby disrupting supplies.
Responding to a question on whether the Finance Ministry is looking to lower borrowing due to higher small savings collections and tax mop-up, this source said that "they would let it add to cash reserves if there are more funds".
The first official cited above said that the Centre is exploring all options to reduce government debt, including converting debt to "more longer-term tenure".
Nirmala Sitharaman on October 20 said that the finance ministry is looking at ways to reduce the level of debt of the government.
India's public debt has been cited as a key constraint to its credit rating profile by global rating agencies, who said the combined debt of the Centre and states was high even before the Covid pandemic struck in early 2020 and led to a sharp increase in the general government debt to around 90 percent of India's GDP.
As part of its fiscal consolidation efforts, the Centre is hoping to lower its fiscal deficit to 5.9 percent of GDP this year to cut it to a maximum of 4.5 percent of GDP by 2025-26.
The Union government's fiscal deficit widened to Rs 7.02 lakh crore in April-September from Rs 6.43 lakh crore in April-August. At Rs 7.02 lakh crore, the fiscal deficit for the first half of the current financial year accounts for 39.3 percent of the full-year target of Rs 17.87 lakh crore.
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