The extension of the free food grain scheme that covers about 80 crore poor people till November is expected to cost another Rs 1 lakh crore. The additional spending of nearly Rs 1.15 lakh crore could widen the fiscal deficit for the year, experts said.
Prime Minister Narendra Modi on Monday announced the expanded vaccination programme that will begin on June 21. Under the ongoing vaccination regime which will end on June 20, states are responsible for purchasing jabs for the 18-44 years age group. The current system of private hospitals being eligible to buy 25% of total vaccine output will continue.
“Cost (of vaccination) could go up to Rs 45,000-50,000 crore,” a government official said, adding that these were rough estimates and the final number would depend on the progress of the programme.
December Target
Finance minister Nirmala Sitharaman had told ET on Monday that funds would not be a constraint and the government would provide whatever was needed for vaccination.
The Centre had budgeted Rs 35,000 crore for FY22 for the vaccination programme in February. The official said some part of the money has already been spent on vaccine procurement.
The government has said it would vaccinate the entire adult population by December this year, which would require a total of about 1.9 billion doses.
Food Subsidy
The Prime Minister also extended the Pradhan Mantri Garib Kalyan Anna Yojana, which will provide 80 crore economically backward people with free ration, till Diwali.
“Food (programme) will cost more, Rs 1 lakh crore,” finance secretary TV Somanathan told ET.
The scheme, which was rolled out last year when the first Covid-19 wave struck India, was reintroduced earlier this year for May-June 2021 as the severe second wave swept the country.
The scheme offers people belonging to the lower income group five kg of rice or wheat along with one kg of pulses per person per month in addition to their entitlement under the food security law.
The estimated cost to the exchequer for these two months is Rs 25,332.92 crore, which will now increase significantly.
Fiscal Implications
Economists say the additional spending on these counts as also additional fertiliser subsidy allowed this year is likely to put pressure on the fiscal deficit target, which has been pegged at 6.8% of GDP by the government.
“Higher expenditure and the likely gap in disinvestment inflows suggest that the government of India’s fiscal deficit will exceed the budgeted Rs 15.1 trillion (Rs 15 lakh crore), despite the higher than budgeted surplus transfer by the RBI,” said Aditi Nayar, chief economist,
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Nomura estimates an expanded vaccination and food programme will result in additional expenditure of 0.4-0.5% of GDP.
“With India already at the cliff-edge of a sovereign ratings downgrade, we remain alert to possible ratings action towards year-end or early next year, as fiscal risks become more evident,” it said, adding that the fiscal deficit target for the year was at risk.
The government official quoted earlier said fiscal numbers will depend on how revenues pan out going forward and would be worked out later in the year.