New Delhi: The Narendra Modi government has no plans to borrow additional funds from the bond markets to meet the cost of cutting excise duty on petrol and diesel, a top government official said. Instead, it will balance its fiscal position with its revenue.
“We will not take additional borrowings for now. We will stick to our lending calendar,” the official told the press on Wednesday.
The official also said that the government will not revisit the inflation target of 4 per cent – with a tolerance band of 2-6 per cent – by 2025-26, which is when the target comes up for official review.
The tolerance band is an error margin that is put in place to cushion the economy.
“Revision of inflation target is not under consideration,” the official said.
Yields on government securities rose on Monday following reports that the government would fund the cost of cutting excise duty on auto fuels through market borrowing, which has already hit a record Rs 14.31 lakh crore in 2022-23. is at a high level.
The official’s remarks came after retail inflation recorded an eight-year high of 7.79 per cent in April. Inflation based on wholesale prices also hit a nine-year high of 15.08 per cent in the same month.
To check inflation, the central government on Saturday cut the excise duty on petrol by Rs 8 and on diesel by Rs 6. Finance Minister Nirmala Sitharaman said in a Tweet: “This announcement will have a revenue impact of Rs 1 lakh crore for the government.”
Along with this he also announced that the government will increase this subsidy Provide subsidy of Rs 1.10 lakh crore on fertilizers and Rs 200 per cylinder up to 12 cylinders to the beneficiaries of Pradhan Mantri Ujjwala Yojana.
Petrol is currently being sold at Rs 96.72 per liter in the national capital while diesel is being sold at Rs 89.62 per litre.
Excise duty cut, coupled with increase in fertilizer and food subsidyAbout Rs 3 lakh crore is expected to be spent on the exchequer in the current financial year.
inflation target
In an article published in economic and political weeklyReserve Bank of India (RBI) Deputy Governor Michael Patra and his colleague Indranil Bhattacharya, a director in the monetary policy department of RBI, Told That the inflation target needs to be updated as estimates of other economic parameters such as natural real interest rates have changed.
“India’s inflation target of 4 per cent is in line with trend inflation for 2019-20. As to the data points for the duration of the pandemic, this estimate will have to be updated with the natural real interest rate which was placed in the range of 1.6-1.8 per cent in the pre-pandemic period,” the authors said.
“Similarly, estimates of threshold inflation – beyond which inflation outstrips growth – that worked out to 6 per cent in the pre-pandemic period will also need to be re-estimated as the output gap closes,” he said. is,” he said.
The government on March 31, 2021 retained the inflation target of 4 per cent with a tolerance band of 2-6 per cent for a period of five years till 2025-26.
The official also said that the plan for privatization of two state-owned banks announced in the budget for 2021-22 is on track and the government would like to do it in the current financial year.
(Edited by Uttara Ramaswamy)