Oppose Bulldozer of Price Rise

Date: 
May 20, 2022
Author: 
Savera

Indians are being crushed by a deadly combination of economic policies that have led to mass unemployment, low wages – and the most destructive of all – runaway price rise. These policies have bulldozed family budgets causing people to cut down on food and other essentials, curtail spending on education of children or care of sick. The Modi government seems to be completely indifferent to the plight of people, going about its usual boastful activities like foreign visits, inaugurating projects to win elections and drumming up religious issues to divide people. If asked about price rise, they are quick to point fingers at so called global factors or the pandemic or even past governments’ policies. However, a deeper look at the spiralling price rise shows that none of these factors are the major cause of rising inflation. In fact it is the government’s own deliberate policies that are causing this devastation. Let us see how.

Modi Era Marked by Rising Prices

In the past five years, prices of rice and wheat, the two most important cereals for Indians, have increased by 24%, wheat flour by 28%, and pulses by 20-30%, according to data put out by the Department of Consumer Affairs. Pulses are an important source of protein in India and their exorbitant prices have put them out of reach for most poor families. This has had a dire effect on nutritional levels.

Cooking oil prices have zoomed up uncontrollably – groundnut oil by 41%, mustard oil by 71%, vanaspati by 112%, sunflower oil by 107% and palm oil by 128%. Every Indian family uses cooking oil and these hikes have led to a severe dent in family spending because it is impossible to skip using cooking oils.

Price rise is not restricted to food grain and cooking oils alone. Prices of potatoes have increased by 65%, onions by 69% and tomatoes by 155% in the past five years. There are seasonal ups and downs in these and other vegetables which only go to show a policy paralysis about vegetable supply.

Various other essential items are also showing severe inflationary pressure. While milk prices have gone up by 25%, loose tea leaves have risen by 41% and even iodised salt has increased by 28% in this period.

Indian farmers have produced record food grain harvests for the past several years. Cereal production was 234.87 million tonnes in 2014 when Modi government took over and since then it has increased to 285.28 million tonnes last year, an increase of nearly 22%. Pulses production was 17.15 which increased to 25.46 million tonnes last year, an increase of nearly 49%, according to agriculture ministry data. It is tragic, and a testimony to this government’s policies that despite this abundance farmers are fighting to get better prices and consumers – common people – are weighed down by high prices.

What could the government have done to ease foodgrain prices? Instead of sitting on huge stockpiles of food grains, if the Modi government had expanded the public distribution system (PDS) to a) include more families that are currently excluded and b) to include other essential items of consumption like cooking oils, pulses, salt, milk etc., then not only would needy families get these items cheap but even the open market prices would have eased up. But the Modi government is so committed to the ‘free market’ concept that it has steadfastly refused to expand the PDS, even when sufficient stocks existed in government warehouses.

Not only that, inn 2020, under cover of the raging pandemic they tried to facilitate private traders by bringing in laws to dismantle the procurement system and allow free trade, stocking and pricing. An year long struggle by furious farmers forced the government to retreat. This year, the Modi government again hurriedly started pushing wheat exports luring farmers and traders with the idea of making profit from high global prices of wheat. This led to a 55% drop in procurement, and increasing prices of wheat in the open market. Finally, the government realised that it had made a mistake in pushing exports – and announced a ban. However, the damage to procurement has been done and it is likely that wheat prices will continue to remain high in the open market. Consumers may be deprived of wheat in their monthly ration quotas, forcing them to go and buy the high priced wheat in markets.

The Great Cooking Gas and Petrol/Diesel Robbery

The other big reason why Modi government is squarely responsible for rising prices is their deliberate imposition of high excise duties on petrol, diesel and other petroleum products, and the withdrawal of subsidy from cooking gas (LPG). Cooking gas (LPG) prices have increased by an incredible Rs.431.50 in just one year for the domestic 14.2 kg cylinder. That’s an increase of 76%. Meanwhile the commercial cylinder of 19 kg now comes for Rs.2397, up by 126% from its price of Rs.1059.5 last year. Meanwhile, petrol and diesel prices continue to be jacked up by the central government. Recall that the Modi government kept the prices frozen for 137 days before the Assembly elections in UP, Punjab and other states. No sooner were these elections over, the prices were raised successively for several days. In the past one year, petrol prices have gone up by over 20% and diesel prices by nearly 17%, according to daily data released by the Petroleum Planning & Analysis Cell (PPAC) of the petroleum and natural gas ministry.

Excise duty collections from petroleum products increased steeply from a mere Rs.0.99 lakh crore in 2014-15, the year Modi came to power, to Rs.3.73 lakh crore in the pandemic year 2020-21, and maintained that level in 2021-22 (data available till December 2021), as per data put out by the Petroleum Planning & Analysis Cell (PPAC) of the Ministry of Petroleum & Natural Gas. Since Modi became prime minister, the Central government has collected Rs.18.23 lakh crore by levying excise duty on petroleum products. Most of this collection is not shared with the states because it has been renamed as ‘surcharge’ or ‘cess’ or ‘additional’ thus escaping the legal duty to share the collection with States.

Rise in the prices of these fuels has a cascading effect on all essential commodities since it hikes up transportation costs. Producers pass on the higher costs to the consumers. So prices of everything from vegetables, food grain and milk to meat, eggs, to manufactured products goes up steadily. In other words, Modi government’s policy of imposing high taxes on petroleum products is directly responsible for across the board and sustained inflation.

Policies Need To Change

April data on Consumer Price Index has shown that retail inflation touched 7.79%, which is an eight year high. Rural inflation was higher at 8.38%. Meanwhile, food items’ inflation clocked in at 8.38%, with rural areas showing 8.5%. Clearly, price rise is raging, and uncontrollable as of now. It is very likely that in the immediate future prices will continue to rise.

The only way of addressing this runaway inflation is for the government to clamp down on profiteering and hoarding, expand the public distribution system to bring various commodities in its ambit (like cooking oils, vegetables, milk, etc) and to step up wheat as well as other grains’ procurement. Importantly, government needs to slash excise duties on petrol and diesel so prices are brought down. Similarly, cooking gas prices need to be controlled and subsidies restored.

The government should also give financial aid of Rs.7500 per month to all families that do not pay income tax so that they can find their feet again in this all encompassing economic crisis. Allocation for rural job guarantee scheme (MGNREGS) should be increased as it is one of the few government schemes that provides some income (though meagre) through work. A similar scheme for urban unemployed should also be launched.