Government Expects No Major Fiscal Impact As Free Food Grain Scheme Is Extended

The government expects no major fiscal impact following the extension of the free food scheme for the next five years, according to a senior government official who spoke on the condition of anonymity.

There have been concerns about meeting the fiscal deficit as Prime Minister Narendra Modi announced an extension of the free food scheme.

However, economist projections expect the government to manage the increase as it has factored in Rs 1.97 lakh crore in FY24 as food subsidy. From April to September, 48% of this, or Rs 95,149 crore, has been expended, according to data from the Controller General of Accounts.

The government is committed to meeting the fiscal deficit target of FY24 at 5.9% of the GDP, according to another official, who also spoke on condition of anonymity.

Any excess funds accrued due to healthy receipts of savings schemes and tax collections will be included in cash reserves, the second official quoted above said. The key challenge to the Indian economy continues to be volatile global oil prices, the person said.

In terms of ways to reduce government debt, the first official quoted above said that the government will try all options, including increasing the tenure of government debt—from shorter tenure to longer tenure—and work towards bringing down interest costs, etc.

However, reducing the dependence on government borrowing is unlikely to be an immediate option, according to the first official.