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Retail inflation has touched 5.76 per cent for May 2016, its highest mark in the last 21 months. Food inflation has touched a massive 7.2 per cent. Tomato prices have skyrocketed to Rs 80-100/kg.
Against this backdrop, Union finance minister Arun Jaitley held a high level meeting on Thursday (June 16) in which Prime Minister Narendra Modi was also present. Along with corruption, inflation was a big issue in the 2014 Lok Sabha elections. Modi coined the slogan, “It’s time to defeat inflation, it’s time to defeat Congress.”
Inflation was as high as 8.3 per cent when Modi took oath in May 2014. Lady luck smiled on him and inflation fell continuously since then touching a low of 3.7 per cent in August 2015. This was largely because of declining crude oil prices as seen in the chart below. Since September 2015, retail inflation has been rising, de-coupling itself from the trend in crude prices.
CPI vs crude oil movement in the past two years
Source: Ministry of finance and US Energy Information Administration.
Krishna Rao (name changed) is a 70-year-old retired individual with no pension. He relies mainly on income from interests just like most other retired Indians who do not have pensions. In December 2015, he was making about Rs 17,000 a month and managed to save about Rs 3,000. Early this year, as a result of a mix of maturing five-year deposits and lower deposit rates, his income from interests reduced to Rs 15,500 per month.
The aam aadmi’s favourite dal has gone missing from his plate.
Meanwhile, the inflation in fuel, non-vegetarian food items, vegetables, pulses and so on pushed his expenses to Rs 15,500. Suddenly he was saving nothing from his interest income, making him dependent on his savings pool and increasingly worried about the future, particularly when medical expenses tend to shoot up as you grow older.
This is the story of every working middle class Indian who does not make the sort of income made by government servants or corporate executives. This is increasing fear and insecurity amongst lower income groups.
We decided to compare the retail prices of essential food items today versus those two years ago when Modi assumed office. As we can see from the table below, the prices of pulses have doubled while those of wheat, sugar, milk and eggs have also increased. Prices of onion, groundnut and rice have declined during the same period.
Increase in price of essential commodities May 2014 vs June 13, 2016
Source: Directorate of Economics and Statistics Publication 2013-’14 and Daily Wholesale and Retail Prices.
Pulses are a rich source of protein for vegetarians as well as a common item in the menu of every household. The current high prices of dal (more than 73 per cent to more than 117 per cent) and wheat (more than 20 per cent) means they are fast vanishing from the plates of the aam aadmi.
The same story is repeated in the case of sugar. Sugar prices are up 15 per cent from December. Instead of controlling sugar exports, they are up by about 40 per cent. No wonder that rich shareholders of sugar companies are laughing their way to the bank with a 100 per cent return in the last six months.
The BJP accuse that there had been a significant price rise in ten years of Congress rule. While dal prices rose by 137 per cent during ten years of Congress rule (as claimed by the BJP), it has increased by almost similar levels in two years of the BJP’s rule alone.
Confused food minister
Union food minister Ram Vilas Paswan has been blaming everybody and everything for the current high prices, accusing hoarders, black marketers, low rainfall and even state governments. However, he seems to have forgotten that the BJP or BJP-supported parties are in power in half of the states in India.
“This time there is no chance of prices (of dal) rising beyond the normal level as adequate measures have been taken to contain prices,” Paswan said on April 21. Perhaps he was referring to Rs 150/kg as the new normal level now as far as prices of pulses are concerned. On sugar he is still contemplating measures to curb exports.
The aam aadmi bombarded by record GDP and FDI, direct benefit transfer/Jan Dhan/ Pradhan Mantri Mudra Yojana, Digital India and Make in India schemes is thoroughly confused. What’s the use of all this when his favourite dal is missing from his plate, and when buying vegetables, eggs or chicken becomes a luxury and his morning chai is without cheeni?
To sum up, if not for low oil prices, inflation would have been at much higher levels. Price rise is a cause of concern for the government as the BJP can’t forget how it lost the 1998 state elections in Delhi because of soaring onion prices. If inflation is not brought under control, it has the potential of spoiling BJP’s chances in the Uttar Pradesh polls next year.