Will higher MSP affect fiscal deficit target: Jaitley says no

New Delhi, July 5: Union Minister Arun Jaitley said the government's fiscal deficit target would not be breached on account of higher MSP for 14 crops as large provisioning for food subsidy has already been made in the Budget for current fiscal.

Seeking to address farm distress ahead of general elections, the government has hiked Minimum Support Price (MSP) paid to farmers for paddy by a record Rs 200 per quintal and by up to 52 per cent in other Kharif or summer-sown crops.

Announcing the decision after a meeting of the Cabinet Committee on Economic Affairs (CCEA), Home Minister Rajnath Singh said it would cost an additional Rs 15,000 crore to the exchequer.

In the 2018-19 Budget, the government has provided Rs 1.7 lakh crore towards food subsidy.

"Considering the large provisioning made in the Budget for food subsidy, the government will be able to absorb the additional expenditure without breaching the fiscal deficit target," Jaitley said in a tweet.

Jaitley had presented the Budget as Finance Minister and is now a minister without portfolio as he is recuperating from a kidney transplant operation.

The government aims to reduce the fiscal deficit for the current financial year ending March 2019 to 3.3 per cent of the GDP from 3.5 per cent in the previous fiscal.

Jaitley stressed that the government's initiative in raising the MSP for 14 crops would enrich and empower the farmer.

"Added to the social sector and infrastructure investments in the rural areas, the revised MSP will go a long way to raise the quality of life in rural India," Jaitley said.

According to a senior agriculture ministry official, the increase in MSP of paddy would result in an additional burden of Rs 12,000 crore to the exchequer as the government procures paddy from farmers for supply through ration shops.

The remaining Rs 3,000 crore has been provided for procurement of other crops when market prices fall below the MSP, the official explained.