Home Uncategorized PM Narendra Modi’s ‘Acche Din’ faces first big test – food inflation

PM Narendra Modi’s ‘Acche Din’ faces first big test – food inflation


Armed with a decisive mandate, Prime Minister Narendra Modi has embarked on a mission to deliver on his single biggest promise to bring back ‘Acche Din’ (good days) but its speedy realisation is an uphill task.

The single biggest trouble spot, and challenge, is controlling retail inflation. Rising prices of essential food items like vegetables, fruits and cereals, have already pushed up inflation to five-month high of 6.01 per cent in May.

If prices are not controlled in time, the feeling of triumph in the BJP would not take much time to turn into one of despair.

The failed monsoon in 2009 had led to the worst drought in nearly four decades with food inflation up to more than 21 per cent. Modi would be keen to avoid a repeat.

The Narendra Modi government is not lacking on commitment or pro-activeness on the inflation front with the Prime Minister himself having made it clear, more than once, that curbing inflation is on top of his agenda.

However, the likelihood of below par monsoon – IMD has cut its June-September monsoon forecast to 93 per cent – and the risk of global crude oil prices going out of hand over the political tension in Iraq may further worsen the price situation.

The government is already on the drawing board with contingency plans to deal with the impact of below-normal monsoon on food prices. A weak monsoon may hit summer crops such as rice, corn and soyabean.

As per reports, the government may give subsidised seeds and diesel to farmers and cheaper loans to farmers to help them tide over the crisis and may release rice, wheat and sugar from its stocks to keep prices in check.

But the government realises that food inflation is more to do with supply side constraints and hoarding by traders.

Finance Minister Arun Jaitley said the Centre is committed to ease supply side constraints while blaming inflation partly to withholding of food stocks by traders. Jaitley also urged states to take firm measures against hoarders to check speculation.

However, it remains to be seen whether the Modi government, with help from state governments, can bring about systemic changes in the system.

The Union Budget, due to be presented next month, may throw more light on the government’s action plan and will test its resolve to introduce tough measures to bring succour to the common man.

Prime Minister Narendra Modi has already prepared ground for a “bitter medicine”.

“A mother knows that if she doesn’t give her child bitter medicine today, that will probably cause long-term damage. To improve the economic health of India, pull the country out of the current mess, shouldn’t we take some bitter decisions?” Modi said.