Subsidy Bill: The government can cut its total subsidy in the general budget 2022-23. This could mainly have an impact on fertilizer and food subsidies. The budget is expected to allocate Rs 2.60 lakh crore and Rs 90,000 crore, respectively, for its food and fertilizer subsidies. This amount is less than the revised estimates for FY 2022.
According to the Economic Times report, the total subsidy bill for the current fiscal is expected to be around Rs 5.35-5.45 lakh crore. Officials said that the government wants to reduce it in the next financial year.
Fiscal deficit target may be 6.5%
An official said that the fiscal deficit target for the fiscal year 2022-23 is expected to be kept at 6.5 per cent of the gross domestic product (GDP). This is less than the 6.8 per cent of GDP announced in the last budget. The official said that the subsidy on food and fertilizers will be as per our financial targets.
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Food subsidy bill may remain at Rs 3.90 lakh crore
The revised estimates of the food subsidy bill for the current financial year are expected to be around Rs 3.90 lakh crore. This is higher than the budget estimate of Rs 2.43 lakh crore, though it is lower than Rs 4.22 lakh crore for FY21. Food subsidy in FY 2022 will be higher than the budget allocation. The reason for this is the distribution of free food grains under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) till March 2022 due to COVID-19. In the financial year 2022, the estimated cost of Pradhan Mantri Garib Kalyan Anna Yojana will be 1.47 lakh crores. The government had made a provision of Rs 79,530 crore for fertilizer subsidy for the fiscal year 2022 in the budget.
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Fertilizer subsidy expected to remain low
However, the government will have to provide double the additional funds due to increase in the prices of fertilizers, which could almost double the subsidy bill to Rs 1.41 lakh crore. Finance ministry officials said the fertilizer subsidy allocation for FY2023 would be lower than the revised estimates.
Bank of Baroda Chief Economist Madan Sabnavis said the subsidy will mainly depend on the revenue projection of the government, but the food and fertilizer subsidy is unlikely to be cut much as the government’s political promises will rest on the exchequer. Will be heavy
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Aditi Nair, chief economist at credit rating agency, said out of the total cost of Rs 1.47 lakh crore of Pradhan Mantri Garib Kalyan Yojana this year, Rs 90,000 crore has already been spent. This means an additional Rs 60,000 crore will be allocated in food subsidy.
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