New Delhi: India is considering a plan to transfer cash to farmers to ease their financial burden instead of offering subsidies, people with knowledge of the matter said.
Prime Minister Narendra Modi’s government is planning to combine all farm subsidies, including fertiliser costs, and instead pay farmers cash, the people said, asking not to be identified as the discussions aren’t public. The additional cost will be limited to Rs 70,000 crore ($9.8 billion) annually after a full roll-out of the programme, the people said. Finance Minister Arun Jaitley had budgeted Rs 70,100 crore for farm subsidies in the year ending March 31.
Finance ministry spokesman D S Malik didn’t respond to two calls made to his mobile phone.
The plan for the handout comes after the ruling Bharatiya Janata Party was voted out in key state elections last month, forcing Modi to draw up a course correction before federal polls due by May. The government, which has already exceeded the annual budget deficit target, has little room for spending in the current year, having forgone some tax revenue on goods and services following the defeat.
The additional spending won’t impact the nation’s fiscal deficit for the current year ending March 31, the people said. The rupee and bonds rebounded after the report pegged the cost lower than the over Rs 2 trillion estimated initially.
“Right now if you do such a thing it will be by cutting down on other costs,” said Madan Sabnavis, chief economist with Care Ratings Ltd in Mumbai. “They won’t go beyond the fiscal deficit target of 3.3 per cent” of gross domestic product this fiscal year.