New Delhi has banned wheat exports as an intense heat wave hit production and domestic prices hit an all-time high. The sudden ban on wheat exports trapped around 1.8 million tonnes of the grain in ports, which could force traders to take heavy losses.
This comes against the backdrop of rising inflation in India that hit an eight-year high in April, while wholesale inflation reached at least a 17-year high, posing a major headache for Prime Minister Narendra Modi’s government ahead of elections to several state assemblies this year.
“We are completely focused on reducing inflation. The impact of the Ukraine crisis was worse than anyone’s imagination”said an official, who did not want to be identified by Reuters.
The government estimates that a further 500 billion Indian rupees of funds will be needed to subsidize fertilizers, up from the current estimate of 2.15 trillion rupees, the two officials said. The government could also offer another round of tax cuts on gasoline and diesel if crude oil continues to risewhich could mean an additional Rs 1 trillion to Rs 1.5 trillion hit in the 2022/23 fiscal year that started on April 1, the second official said.
One of the officials said the government may need to borrow additional sums from the market to finance these measures and that could mean a deviation from its 6.4% of GDP deficit target for 2022-23.
The Indian government plans to borrow a record 14.31 trillion rupees in the current fiscal year, according to budget announcements made in February. The other official said the extra loan will not affect the planned April-September loan of Rs 8.45 trillion and could be taken between January and March 2023.
Source: Ambito
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