Centre mulls spending over ₹2 lakh crore to fight inflation, say sources

Retail inflation rose to an eight-year high in April, while wholesale inflation rose to at least a 17-year high, posing a major headache for the government.

The government is considering spending an additional ₹2 trillion ($26 billion) in the 2022-23 fiscal year to cushion consumers from rising prices and fight multi-year high inflation, two government officials told Reuters.

The new measures will be double the ₹1 trillion hit government revenues could take from tax cuts on petrol and diesel the finance minister announced on Saturday, both the officials said.

Retail inflation rose to an eight-year high in April, while wholesale inflation rose to 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 fully focussed on bringing down inflation. The impact of Ukraine crisis was worse than anyone's imagination," one official, who did not want to be named, said.

The government estimates another ₹500 billion additional funds will be needed to subsidise fertilisers, from the current estimate of 2.15 trillion rupees, the two officials said.

The government could also deliver another round of tax cuts on petrol and diesel if crude oil continues to rise that could mean an added hit of ₹1 trillion-1.5 trillion in the 2022/23 fiscal year started on April 1, the second official said.

Both the officials did not want to be named as they are not authorised to disclose the details.