On Wednesday, the central government extended its free foodgrain scheme for the poor till December 2023. Major festivals also elections will be held in Himachal Pradesh and Gujarat. Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), launched in April 2020, will cost the exchequer Rs 44,762 crore over and above the budgeted food subsidy for the financial year 2022-23 (FY23). Total expenditure on the scheme would be about Rs 3.9 trillion. 5 KG of wheat and rise would be given to the poor free of cost under this scheme. 

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To extend the scheme of the Union Cabinet, the scheme came at a time in FY23. On September 1, 2022, the CG had 60.1 mt of food grain, including 10.82 mt of unmilled paddy. Also, every year on October 1, the quantity of food grain is required to maintain healthy operational stock with a reserve level of 30.75 mt.

“The amount per se may not be distortionary in case other revenue heads are met. GST collections for the Centre have been around Rs 30,000 crore higher (apart from the shared component). Also, other tax collections like corporation tax have been buoyant. The challenge will arise if there are shortfalls in, say, disinvestment or non-tax revenue,” Madan Sabnavis, chief economist, Bank of Baroda, said. He said the impact on fiscal deficit would be marginal if these revenue trends persist. “If all other Budget numbers are as per the Budget (ceteris paribus), the increase will be 0.2 per cent of GDP,” Sabnavis added. Due to the decision, Aditi Nayar, a chief economist at ICRA, said the fiscal deficit might modestly overshoot the budgeted level. “We expect the size of the fiscal deficit overshoot to be limited to around Rs 1 trillion,” Nayar said.