Government will take additional loan of 1 lakh crore.
Reduction in excise duty on petrol and diesel will increase the burden of 1 lakh crore on the exchequer every year. The government has announced a reduction in excise duty of Rs 8 per liter on petrol and Rs 6 per liter on diesel.
Giving relief from inflation, the central government excise duty on petrol ,Excise duty on Petrol and Diesel) has been cut by Rs 8 per liter and on diesel by Rs 6 per liter. Due to this decision, there will be a loss of 1 lakh crore rupees every year to the exchequer. According to the Bloomberg report, the more the government’s revenue falls, the more the government will take additional loans. At present, many public welfare schemes are being run by the government. In such a situation, fertilizer subsidy and food subsidy will be funded from the additional earnings from GST and personal income tax.
Since the government has decided not to make up for this deduction from the additional revenue collection, it has no other means but to lift Rs 1 lakh crore from the market. The announcement of additional borrowing of 1 lakh crore by the government will have a serious impact on the bond market. Yields on 10-year bonds have risen in the last one month. The Reserve Bank has already surprised everyone by increasing the interest rate. An increase in the interest rate leads to an increase in bond yields.
14.31 lakh crore loan target
In Budget 2022, the government has set a target of collecting debt of 14.31 lakh crore in the financial year 2022-23. For this, the government issues bonds. The biggest buyers of bonds are banks and insurance companies. The government has decided to raise Rs 8.45 lakh crore loan from the market by the first half of the current financial year i.e. by September 2022. The government has focused on capital expenditure.
Why was the duty reduced?
Earlier in November 2021, the government had cut excise duty on petrol by Rs 5 per liter and on diesel by Rs 10 per liter. At that time also inflation was at its peak. That move of the government had reduced retail inflation by 30 basis points or 0.30 per cent. The recent decision of the government will also bring down the rate of inflation. Although its effect will not be seen immediately, but the rate cut will be seen in the coming months. Retail inflation has been above 6 per cent for the last four months.