New Delhi: A possible cut in import duties on edible oils and base metals, the ban on wheat exports, and a campaign to highlight pro-poor policies while downplaying price rise — these are the weapons the Narendra Modi government is readying in its armoury to counter the growing pressure and criticism over runaway inflation as it nears its eighth anniversary in power.
There is an urgency in the government to push its line on an electorally sensitive issue as Gujarat and Himachal Pradesh go to the polls in the second half of 2022, and inflation is sure to be one of the main issues for the ruling BJP’s rivals in both states.
At a press conference on 14 May, Congress leader and former finance minister P. Chidambaram had attacked the Modi government and the Reserve Bank of India (RBI) for being “behind the curve” in taming inflation and preventing outflow of funds from the country.
He had further said that the government cannot use the Russia-Ukraine conflict to justify the rise in retail and wholesale inflation.
While retail inflation hit an 8-year high of 7.8 per cent in April, wholesale inflation surged to a 9-year high of 15.08 per cent on the back of elevated food and energy prices in the same month, according to data released by the commerce ministry Tuesday.
Sources in the finance ministry indicated that the government is toying with several options on curbing inflation, including cutting taxes on the import of edible oils, which were a major contributor to the rise in inflation in April, and an excise duty cut on petrol and diesel.
The BJP, meanwhile, said a plan is in place with respect to import duty on commodities like base metals, with leaders also talking about efforts to highlight the “pro-poor policies” brought in by the party’s governments at the Centre and in states.
Modi first took his oath as Prime Minister on 26 May 2014, after the BJP swept that year’s general elections. His second term started on 30 May 2019, following a second consecutive landslide in the Lok Sabha elections.
Govt’s steps to curb inflation
BJP national spokesperson on economic affairs Gopal Krishna Agarwal told ThePrint that the Centre is looking at rationalising import duty on commodities like base metals so that input costs can be reduced for the manufacturing sector.
He further said that global fuel prices are expected to fall in the “near future”, once the Russia-Ukraine war, which has completed 12 weeks, is over.
“On fuel prices, our expectation is that with the government’s focus on renewable energy sources, like solar power and new hydrogen energy, as well as electric vehicles, fossil fuel prices will come down,” he added. “And once the Russia-Ukraine war ends, the global fuel prices will further fall in the near future. Ultimately, this will help the economy manage inflation.”
According to data prepared by the Petroleum Planning and Analysis Cell of the Union Ministry of Petroleum and Natural Gas, the price of India’s crude oil basket rose to an over seven-week high of $112.21 per barrel Tuesday.
Agarwal said the government had taken pro-poor measures in the past, which will help people cope with high inflation: “Our government has taken up several welfare schemes to directly help the people with a low income and those below the poverty line. Free distribution of food to 90 crore people has been hailed as one of the most effective welfare schemes by the World Bank.
“The PM has said he will ensure that social welfare schemes such as PM Awas Yojana (low-cost housing), Ayushman Bharat (health insurance), PM Kisan Samman Nidhi (cash aid for farmers), Ujjwala Yojana (free gas cylinders and stoves), Mahatma Gandhi National Rural Employment Guarantee (unemployment allowance) etc cover 100 per cent of our population.”
These steps, Agarwal said, “will help poor people cope with inflation and empower them”.
In a 14 May notification, the Centre banned the export of wheat due to factors such as lower wheat production and a sharp rise in its global prices because of the Russian invasion of Ukraine.
The domestic prices of wheat have risen by over 19 per cent in the past year due to unregulated exports even when there has only been a slight fall in output, Food Secretary Sudhanshu Pandey said at a press conference last Saturday.
A senior government official told ThePrint on condition of anonymity that while the government is mulling over several possible ways to curb inflation, the two main options it is working on are “cutting import duty on edible oils, and an excise duty cut on petrol and diesel”.
In the national capital, petrol is currently being sold at Rs 105.41 per litre, and diesel at Rs 96.67 per litre.
The effective duty on crude edible oil imports stands at 5.5 per cent. The basic customs duty is zero for all crude variants of edible oil. It actually constitutes two cesses — the agricultural infrastructure development cess, and social welfare cess.
BJP to highlight pro-poor policies, play down inflation
As the Modi government completes eight years in office, BJP leaders ThePrint spoke to said that, from 30 May, the party will list out policies of the government that “have had a positive impact on the poor”.
On the issue of inflation, though, party leaders have been asked to share expectations of a reduction going forward, they added.
“The idea is to highlight all that the government has done and how far we have come. There are so many pro-poor policies, and implementation has been the key,” a senior BJP leader who did not wish to be named told ThePrint.
“As far as price rise and fuel prices are concerned, they are all related to global changes. We are hopeful that things will improve in the coming few months, and there’s quite some time for the (Himachal and Gujarat) assembly elections,” the leader said.
All states, the leader added, have been asked to prepare a comprehensive “report card” in the form of a booklet and make the public aware of what all was promised and how much the government has delivered.
“As far as poor sections of society are concerned, the Centre as well as BJP-led state governments have taken a number of welfare measures. People understand that the Russia-Ukraine war has had an impact on the economy, too, and it’s just a matter of months before the situation improves,” the BJP leader said.
He added that the upcoming assembly elections will be fought on “brand Modi” and the work done by the Centre and state governments, and “temporary” issues like fuel price hike will not have a big impact.
(Edited by Gitanjali Das)