The new measures will be double the 1 trillion rupee cut that government revenue could suffer from the petrol and diesel tax cuts announced by the finance minister on Saturday, the two officials said.
Retail inflation in India hit its highest level in eight years in April, while wholesale inflation hit its highest level in at least 17 years, posing a major headache for the government of Prime Minister Narendra Modi ahead of elections to several state assemblies this year.
“We are fully focused on reducing inflation. The impact of the Ukrainian crisis has been worse than anyone could imagine,” said an official, who did not wish to be named.
The government estimates that an additional 500 billion Indian rupees will be needed to subsidize fertilizers, from the current estimate of 2.15 trillion rupees, the two officials said.
The government could also grant another round of petrol and diesel tax cuts if crude oil continues to rise, which could result in an increase of 1 trillion to 1.5 trillion rupees in the financial year. 2022/23, which begins April 1, the second official said.
The two officials declined to be named as they are not authorized to divulge details.
The government did not immediately comment outside office hours.
One of the officials said the government may have to borrow additional money on the market to finance these measures, which could lead to a layup against its deficit target of 6.4% of GDP for 2022-23.
The official did not quantify the amount of borrowing or budget layup, saying it depends on the amount of funds they end up diverting from the budget during the fiscal year.
The Indian government plans to borrow a record amount of 14.31 trillion rupees in the current fiscal year, according to budget announcements made in February.
The other official said the additional borrowing will have no impact on the planned April-September borrowing of Rs 8.45 trillion and could be undertaken in January-March 2023.
($1 = 77.8500 Indian rupees)