Rupee fall likely to hit govt finances with ballooning subsidy bill

The finance ministry has hinted that India's fertiliser subsidy bill for 2022-23 (FY23) could rise to around Rs 2.5 trillion against Budget Estimates (BE) of Rs 1.05 trillion

A depreciating rupee — that touched Rs 80 per dollar in intraday trade on Tuesday — may adversely impact central government finances through a higher subsidy bill, albeit higher inflation possibly increasing government revenue. 

With already elevated crude and fertiliser prices due to the ongoing Russia-Ukraine stand-off, an eroding rupee will add to the import bill and subsequently the subsidy burden on the government.

The government sells fertilisers at subsidised rates to farmers and provides cooking gas subsidies through Pradhan Mantri Ujjwala Yojana (PMUY).

“Subsidy burden of the government will increase with a depreciating rupee because a very high