September 24, 2023

Modi’s Tryst with Price Rise


THE BJP election manifesto of 2014 started with a section entitled “Attend the Imminent” and the very first item in that section was price rise, where it accused the outgoing UPA government of threatening the food security of millions by having ushered in “runaway food inflation”. Five years later, in 2019, the party’s manifesto was strangely silent on the issue of price rise and the word “inflation” did not figure in the document at all. Was this a case of the party being confident that it had tamed the demon of inflation or just another example of its tendency of remaining totally silent on an issue that it realised would not reflect well on its own performance? Let’s look at the evidence and the answer will become all too clear.

The official wholesale price index shows that prices have risen on average by a little over 30 per cent in May 2023 compared to the same month in 2014, when the Modi government was sworn in. But that’s only an average. The same index reveals that wheat prices are up 53 per cent, pulses are 56 per cent costlier, fruits and vegetable prices have risen 43 per cent, milk is 42 per cent costlier and eggs 45 per cent more expensive. These are broad categories of food items of daily consumption.

Dig deeper and the picture is even more grim. Retail price data from the consumer affairs ministry, for instance, shows that over a nine-year period (from May 2014 to June 2023), the average monthly price of atta (wheat flour) is up by over 50 per cent and rice by nearly 43 per cent. But the situation in pulses, the main source of protein for large sections of the population that either do not eat meat or cannot afford to get it regularly, is even more alarming. The average monthly prices of arhar (tur) dal have risen by 83 per cent, those of urad by 62 per cent and of gram dal by 52 per cent. Another source of protein, milk, has proved just as unreachable for the poor with average monthly retail prices going up by nearly 64 per cent. Take a look at cooking mediums and the situation is just as bad. Groundnut oil has become nearly 57 per cent costlier, mustard oil 46 per cent more expensive and soya oil 60 per cent higher priced. Even the humble vanaspati costs nearly 70 per cent more today than it did when Mr Modi took office. Sunflower oil and palm oil are 41 per cent and 49 per cent costlier than in May 2014, respectively.

Salt, without which any nutritional diet is impossible to conceive of, costs 53 per cent more now than it did in May 2014. Tomatoes cost a whopping 130 per cent more. What does all this do for the food security of the poor, Mr Modi?

And remember, these official figures at best capture the variation over the nine-year period. What they do not reveal is the skyrocketing spikes in prices of specific commodities from time to time over these nine years.  For example, arhar dal prices had reached Rs 200 per kg in Sept-Nov 2015. Sugar prices had crossed Rs 50 a kg in early 2017. Onion prices had crossed Rs 100 a kg within the first year of the Modi government and have seen repeated spikes since then too. In October 2015, mustard oil prices had reached over Rs 150 per kilo and a year ago they were hovering around Rs 200. Groundnut prices too have been in the range of Rs 200 per kg in recent months. Tomato prices are currently at Rs 100 or more per kg in many parts of the country. For the relatively well-off, such short-term spikes in food prices might be just temporary problems eating a little into household budgets, but for the poor who are barely making ends meet, the weeks or months for which these spikes typically last means having to do without something they can no longer afford.

There are enough methods available to a government that wants to do so to prevent such volatility, but the evidence shows that despite a lot of tall talk about price stabilisation funds and so on, the Modi government has in practice chosen not to do so. It would rather let the market have its way, and the poor are paying the price for this policy.

It is not as if these price spikes are leading to a rise in incomes of farmers. The fact that farmers were on the roads surrounding the capital for well over a year in 2020-21 braving a pandemic shows quite clearly that they are not getting suitable prices for their produce. In the meantime, the prices of inputs that they use – fertilisers, pesticides, diesel, fodder, etc – have continued to mount inexorably. For instance, just in one year, the price of high-speed diesel used for irrigation pumps went up by 23.7 per cent between 2015-16 and 2016-17. In Modi’s rule all these prices have increased bringing widespread misery for farmers.

The biggest betrayal by this government on the price front, however, has been its cynical use of low international oil prices to rake in taxes rather than pass on the benefits to the people. Consider the facts. As of June 27, this year, the price of petrol in Delhi was Rs 96.72 per litre, while it was over Rs 100 per litre in almost every other city and state. Diesel at Rs 89.62 per litre was only a little less expensive. Once again in other cities and states the price level was even higher. Why are prices so high? The government pretends that it has nothing to do with the pricing of petroleum products and the oil companies are allowed to set their own prices. Strangely, these apparently autonomous companies hold prices for weeks or even months before crucial state assembly elections, but let us leave that aside. The truth is that over 35 per cent of the price you pay for diesel (in Delhi), and about 41 per cent of the price of petrol is in the form of various taxes, the bulk of it going to the central government.

The government’s own data shows that the Centre’s share of taxes on petroleum crude and products has risen from Rs 1.26 lakh crore in 2014-15 to Rs 4.32 lakh crore in 2021-2, the last full year for which this data is available. That’s a rise of 243 per cent! That’s an extra Rs 13,000 per family every year. The government would argue that this burden is only borne by those who buy petrol or diesel and the poor don’t. But even those who don’t buy diesel directly pay for it in the form of higher transportation costs for everything they buy.

The result of this burgeoning tax burden is that while the international price of oil is today significantly lower than it was in May 2014, when the Modi government came to power, the retail prices of petroleum products in India have risen sharply. The monthly average international price of what is called the ‘Indian basket of crude’ – a combination of various specific kinds of crude oil that India imports – was about $107 per barrel in May 2014. In May this year, it was just under $75 per barrel. Modi in one of his election speeches early in his tenure joked about his luck in international oil prices coming down during his tenure. It should have been lucky for all Indians. The reason it hasn’t been is that this government has chosen not to use the golden opportunity to provide some relief to people. As a result, at a time when international crude prices have dropped by about 30 per cent, the domestic price of petrol has gone up by 35 per cent in Delhi while diesel has become 60 per cent more expensive. Meanwhile, the price of non-subsidised LPG (cooking gas) has more than doubled since September 2016, rising from Rs 466.5 for a 14.2 kg cylinder to Rs 1,053 in Delhi.

To protect the poor from the onslaught of such all-pervasive price rise, the government could have strengthened and widen the ambit of the public distribution system by including. Instead, it has imposed a Aadhaar linked electronic system for distribution, forcing large numbers of highly dependent families to starve while tom-tomming about how many “labharthis” it has created.


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