Rising inflation in India puts pressure on Modi government

The prices of necessities such as milk and cooking gas in India are rising, putting pressure on consumers who are already fighting the economic shocks of the pandemic and giving rise to the Narendra Modi government. Here comes a new challenge.

India’s retail inflation rate in June and May was 6.3%, as rising food and fuel costs pushed the consumer price index above the central bank’s 6% target for the first time this year. The wholesale inflation rate in May hit a record high of nearly 13%.

Economists worry that India may fall into an out-of-control price increase cycle for many years Hindered its development and placed a political burden on the country’s leaders.

The prospect of price increases – as inflation increases Globally higher –Although growth prospects are uncertain. Hopes for a rapid rebound from last year’s historic recession were frustrated by the brutality of the second wave of Covid-19 infections recently.

Priyanka Kishore, head of India at the research company Oxford Economics, said: “It is very difficult for this country at the moment because you are trying to solve a very serious growth problem.”

Economists believe that this increase partly reflects the disruption of the supply chain caused by the blockade, but believes that as global commodity prices rise, this may also lead to more lasting disruptions.

This forces the authorities to take action, and it is well known that Indian voters will oppose a government that leads inflation.

Although the Reserve Bank of India has kept interest rates unchanged for a year, instead focusing on restoring growth, some economists believe that it is more likely to raise interest rates in the next few quarters.

The central and state governments are also facing calls to cut high fuel taxes. “It is clear that higher fuel costs have been translated into all market segments,” the rating agency CARE wrote in a report. “The government needs to start tax cuts.”

Price pressures have prompted companies to increase prices.

The two largest milk brands in the country, Mother Dairy and Amul, both raised their prices by 2 rupees per liter this month, equivalent to about 4%. These companies reported double-digit growth in wholesale, packaging and logistics costs.

This has hit the poor and middle class in India, who bear the brunt of the economic shock caused by the country’s pandemic.For example, rising food prices intensified Food insecurity For disadvantaged groups.

Mohammad Huseini, 48, who runs a dairy stall in Mumbai, said his sales have fallen 35% since the pandemic began.

“I see that the number of people buying has decreased because people are unemployed,” he said. “People don’t have money to consume, but milk is essential, so even if the cost goes up, people must buy it.”

The 55-year-old fruit vendor Bittu Gupta usually likes to buy 3 liters of milk a day to feed her five children, but it is now reducing to 2 liters. She provides them with tea in the morning and a glass of milk and bread for dinner. “We gave them a little less, but they need it,” she said. “Everything is rising.”

The 27-year-old maid Sagarika Mukherjee bought only enough oats to give her 10-year-old son a bowl of oats. She gave up tea and other trivial matters.

“The prices of everything — vegetables, rice — are rising every day,” she said. “It’s hard for the poor, but the government doesn’t worry about us. We only have faith.”

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