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India Facing twin deficit problem due to Commodity prices Subsidy

Published on June 21, 2022
Current Context: Finance ministry forewarned the re-emergence of the twin deficit problem in the economy, with higher commodity prices and rising subsidy burden leading to an increase in both fiscal deficit and current account deficit.
India Facing twin deficit problem due to Commodity prices Subsidy
  • This time the government revenues take a hit as there is a cut in excise duties on diesel and petrol, and also upside risk to the budgeted level of gross fiscal deficit has emerged.
  • Besides India's fertilizer subsidy bill for FY23 could rise to around Rs 2.5 trillion against the Budget Estimate of Rs 1.05 trillion because of a global supply shortage.
  • In addition to that PM Garib Kalyan Anna Yojana until September shall increase the food subsidy outlay for FY23 to Rs 2.87 trillion, from the Budget Estimate of Rs 2.07 trillion.
  • A Govt decision to provide a subsidy of Rs 200 per gas cylinder to over 90 million beneficiaries of the Pradhan Mantri Ujjwala Yojana will also cost additional Rs 6,100 crore a year to the exchequer.
  • RBI increased policy rates by 90 basis points in a month to fight record inflation levels, leading to increased interest rates.
  • As long as the Russia-Ukraine conflict continues, many other reasons include trade disruptions, export bans, and the resulting surge in global commodity prices.

Question:

Q.1 Under PM Garib Kalyan Anna Yojana govt has decided to increase the food subsidy outlay for FY23 to __________ trillion?
a. 2.07 trillion
b. 1.05 trillion
c. 2.5 trillion
d. 2.87 trillion
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