By Aftab Ahmed

NEW DELHI, (Reuters) – Two government officials spoke to Reuters that the Indian government may spend an extra 2 trillion rupees ($26billion) during 2022/23 in order to protect consumers against rising prices and combat multiyear high inflation.

According to both officials, the new measures will double the amount of 1 trillion rupees that government revenue could be derived from tax cuts for petrol and diesel.

India’s retail inflation rose to an eight-year high in April, while wholesale inflation rose to at least a 17-year high, posing a major headache for Prime Minister Narendra Modi’s government ahead of elections to several state assemblies this year. 

We’re fully focused on the reduction of inflation. One official who declined to identify himself said that the impact of Ukraine’s crisis had been worse than any person could imagine.

According to the officials, 500 billion Indian rupees more funds are needed for subsidizing fertilisers. This is in addition to the 2.15 trillion rupees currently being estimated.

If the price of petrol and diesel continues to rise, then the government might offer another round tax cut. That could result in an extra hit of one trillion to 1.5 trillion rupees during the 2022/23 fiscal years that started April 1st.

They did not wish to identify themselves as they weren’t authorized to divulge the information.

The government declined to comment immediately outside of normal office hours.

A government official stated that the government could need to borrow more money from the market in order to finance these measures. That would mean that the deficit target of 6.4% per year for 2022-22-23 may be missed.

Officials did not give a precise figure for the amounts of fiscal slippage or borrowing, but said it was dependent on the extent to which funds are actually diverted from the budget during the fiscal year.

According to budget announcements issued in February, India plans to borrow record 14.31 trillion Rupees during the current fiscal.

According to the other official, the borrowing won’t affect the 8.45 trillion rupees planned for April-September and could be completed in January-March 2020.

($1 = 77.8500 Indian dollars)