Fear of widening fiscal deficit

With the government's decision to extend the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKY) till September, the cost of food subsidy for the financial year 206-2 has increased to Rs. 2.5 lakh crore, estimated at Rs. 2.05 lakh crore. Higher global commodity prices and the impact on fertilizer subsidies have put pressure on the central government's fiscal deficit target for next year. If all other estimates remain the same in the Union Budget for 205, then the calculations show that Rs. 30,000 crore expenditure The budget deficit budget has been increased to Rs. 17.5 lakh crore. Earlier it was Rs. 13.5 lakh crore. It will reach 7.5 per cent of Gross Domestic Product (GDP), up from an earlier estimate of 7.5 per cent. Other guesses may change. The budget estimate for fertilizer subsidy in FY 205 starting April 1 is Rs 1.05 lakh crore. This amount may also increase due to increase in commodity prices. Policymakers do not want to give any new figures for this at present, but experts say that at current prices, the Center may have to pay an additional Rs 20,000 crore in fertilizer subsidy.

Prices of major raw materials like phosphate and ammonia are also expected to rise due to steady rise in urea rates and rising crude oil and gas prices. Thus, this amount of subsidy seems insufficient. According to trade sources, the price of Indian gas (pooled gas) could rise from the current ૬ 15 per metric million British thermal units (sasme) to ૮ 15. Estimates show that for every ૧ 1 increase in gas rates, the subsidy for urea is Rs. 2,000 to Rs. Increases to 5,000. Analysts say the epidemic has hit the poor hardest, although the Indian economy is recovering. He also said that global prices would affect the prices of local food items.