New Delhi: The Centre does not expect any major fiscal impact from the free food grain scheme extension in FY24 or FY25, senior government officials said on Monday, adding that the government was committed to meet the fiscal deficit target.
India’s fiscal deficit for the April to September period widened to ₹7.02 trillion, which was 39.3% of annual estimates, up from ₹6.19 trillion in the same period which was 37.3% of the target for the last financial year, as per government data issued last week.
For FY24, the government has set target of ₹17.87 trillion, or 5.9% of GDP, as opposed to 6.4% in FY23.
Amid upcoming state and general elections, Prime Minister Narendra Modi said that the government will extend the free-foodgrain scheme—Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY)—for 800 million poor people by another five years, beginning January.
The scheme was launched during the pandemic, and was amalgamated with the National Food Security Act in December 2022, and extended by another year, to end by this year end.
Fiscal deficit, the difference between income and expenditure, is an indicator of external borrowings required by the government to meet deficit.
With the extension of the food grain scheme, more funds would be needed to procure grains which could lead to higher government spending, more than the estimated ₹2 trillion for FY24.
Reuters quoted an official saying that rise in grain prices could lead to additional spending of ₹5,000 crore to ₹7,000 crore in the food grain scheme.
“We don’t see a major impact from the scheme extension. We are committed to meet fiscal deficit target FY24. The one key challenge to the Indian economy is volatile global oil prices,” one of the officials said.
The officials added that if the government were to receive more funds from tax collections or national small savings fund, it will add to its cash reserves.
The government has estimated that 26% of the projected fiscal deficit to be funded from investments in the National Small Saving Fund (NSSF).
The government has been clocking record numbers for its goods and service tax collections, but also from direct tax collections.
On the ongoing tensions between India and Canada, the officials said that the discord will not have an impact on Canadian investments into India. Relations between India and Canada have been strained after Canadian Prime Minister Justin Trudeau in September alleged the involvement of “agents of the Indian government” in the killing of Khalistani terrorist Hardeep Singh Nijjar in June this year. India on the other hand has rejected the claims and called the allegations as “absurd and motivated.”
