Digesting 4-yr Modi food price shock

Digesting 4-yr Modi food price shock

India's inflation rate may have halved under the Modi government but the prices of at least 10 essential commodities went up by up to 75% from 2014, the year UPA government demitted office to 2018, the last year of NDA government, making little difference in the life of a common man.

The retail prices of 10 commodities — including rice, wheat, pulses, sugar, vegetable oil, milk and cooking gas — have seen an increase in the range of 7%-75% in the past four years, showed data from the Indian Oil Corporation, agriculture ministry and those placed before Parliament by the Centre between 2014 and 2018.

While sugar has become costlier by a whopping 75% from Rs 24 per kg in May 2014 to Rs 42 in June 2018, gram dal, a staple diet in northern India, went up by about 50%, milk by about 17% and cooking gas by over 23%. The prices of wheat and rice surged by 8.5% and 19% respectively.

Prior to the 2014 election, Modi had pledged to reduce the prices of essential commodities. Last week, when the BJP’s manifesto was released, the party had, in fact, lauded its achievement on the price front.

But the data presented by various Ministers of Consumer Affairs, Food and Public Distribution from 2014 to 2018 showed that despite efforts being made by the government to control prices, the rates of sugar, edible oil, foodgrain, milk and cooking oil kept increasing and created a wide gap between the rates of increase and the per capita income.

The Consumer Price Inflation, which was above 8% during the UPA regime, came down below 4% in the last year of NDA rule, which, according to economists, was due to weak rural wage growth, which has shown in rural demand taking a hit. The latest two-wheeler and tractor sales, a proxy to rural demand, is down by over 30% in March.

Despite a steady decline in crude oil prices in the first three years of the NDA government, the prices of items of daily use kept rising. In fact, the government could not control the spike in petrol and diesel prices at the time when international crude prices came down from $120 per barrel in 2011 to a little above $40 per barrel in 2016. An increase in excise duty and VAT kept the prices of the two transport fuels at the same level as those during the UPA regime.