India's fiscal deficit may widen by 70 basis points in FY20 if the government rolls out a relief package for small and marginal farmers.
Finance Minister Arun Jaitley has hinted that a farm relief package for distressed farmers may be a part of the Interim Budget he is set to present on February 1.
Referring to talk about a relief package for farmers, Jaitley said that the farm sector has been facing challenges, and the markets will tend to understand if an approach is rational and not populist.
"Markets will never understand if you act for the sake of populism. But if it’s in the larger interest because of a compelling situation that develops, that’s a logical thing that markets tend to understand," Jaitley said at the CNBC-TV18 India Business Leader Awards through video conferencing from New York.
The finance minister, however, did not give any other details regarding the relief package. "Without getting into the specifics, because that would be disclosing the mind in which we are working, (I can say that) you cannot opt to wait on some of the challenges. Therefore, obviously, there will be a necessity to address them. It has happened in the past. So we intend to work within the parameters of the conventions as they exist," Jaitley said.
On January 17, Agriculture Minister Radha Mohan Singh had also indicated an announcement of major measures in the coming weeks to address farm distress across the country, a move that will come ahead of Lok Sabha elections.
The agriculture ministry has prepared a Cabinet note on "addressing income deficit syndrome of small and marginal farmers" proposing various steps, including a financial package and interest waiver for timely crop loan repayers, sources told PTI.
India's fiscal deficit may widen by 70 basis points in the fiscal year 2019-20 if the government decides to roll out a relief package for small and marginal farmers, according to a report by India Ratings and Research (Ind-Ra).
"In case the government decides to pay Rs 10,000 per acre annually to small and marginal farmers, under ceteris paribus condition, this will push the Centre’s fiscal deficit by 72 bps in FY20. Though not an easy option, if opted, it will delay the rate cut process," India Ratings said.The news comes in a time when there is a mounting pressure on the ruling Bharatiya Janata Party (BJP) to announce a package for the farm sector owing to farmers' protests. The move may play a key role in the upcoming Lok Sabha elections 2019.