Prime Minister Narendra Modi addressed the nation from Red Fort on the occasion of 77th Independence Day in New Delhi.  Photo: PTI

Prime Minister Narendra Modi addressed the nation from Red Fort on the occasion of 77th Independence Day in New Delhi. Photo: PTI

by Ruchi Bhatia

Indian officials are considering a plan to reallocate 1 trillion rupees ($12 billion) from the budgets of various ministries to prevent increases in food and fuel costs without affecting federal deficit targets, according to people familiar with the matter. have been

Prime Minister Narendra Modi will make a decision in the coming weeks that could include lowering taxes on local gasoline sales and reducing import duties on cooking oil and wheat, the people said, speaking on condition of anonymity because the discussions were private. Is.

This will be the second year in a row of similar adjustments to control costs for consumers after the government unveiled a $26 billion plan last year. The proposals follow the central bank’s rate decision last week where it left unchanged borrowing costs – one of the highest in Asia – flagging risks from rising prices.

Curiosity has run high among bureaucrats after Modi vowed to fight inflation that has hit a 15-month high in a speech to the nation this week. India is a country where the inflation of onion and tomato has brought down governments. Although Modi has only a few months to rein in voters to rein in prices, he also cannot afford to reduce the budget deficit, which is being closely watched by global investors.

Budgetary reallocation is not unusual in India, but high dividend payments and steady tax collections from the central bank, as the economy is one of the fastest growing in the world, allow legroom of nearly a trillion rupees, which is equivalent to 2% . Budget for the year till March 2024, the people said.

The fiscal space can also be used to provide affordable credit and houses for the poor, while sticking to the budget deficit target of 5.9% of GDP for the year beginning April 1, he said.

A finance ministry spokesperson did not respond to requests seeking comment.

Uneven rains and floods in several parts of the country have led to a rise in the prices of several household items, including staples of Indian food like tomatoes and onions. Following a ban on wheat exports until 2022, the government last month barred shipments of certain varieties of rice. It also banned the storage of certain food items.

© 2023 Bloomberg L.P.

first published: 17 August 2023 | 4:21 PM First

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