What voters should know about the performance of the Modi government on food prices
Published on: April 11, 2024.
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Food Prices and the Impact on Elections in India
As India gears up for the 2024 general elections, it is important to analyze the key economic factors that have traditionally influenced voter choices in the country. One such factor is food prices, particularly those of essential vegetables.
In India, food prices have always played a significant role in shaping election mandates. A notable example of this is the 1998 assembly polls in Delhi, where the surge in onion prices was widely attributed to the defeat of BJP Chief Minister Sushma Swaraj.
Leading up to this year’s elections, India has been experiencing an average food inflation rate of around 7 percent from January 2023 to February 2024. Cereals, vegetables, and pulses have been major contributors to the rising prices.
While India’s headline retail inflation rate remained largely unchanged at 5.09 percent in February, food and beverage prices saw a slight increase from 7.5 percent to 7.8 percent compared to the previous year.
Comparatively, neighboring Pakistan witnessed an inflation rate of 23.1 percent in February, down from 28.3 percent the previous month. In the US, the inflation rate during the same period stood at 3.2 percent.
Impact of Vegetable Prices
Among the various vegetables, tomatoes, onions, and potatoes, known as the TOP trio, form the staple diet of Indians. While the production of these vegetables generally exceeds the demand, any disruption in their supply can lead to price hikes.
Data from the Department of Consumer Affairs reveals that the average retail prices of tomatoes more than doubled on April 9, 2024, compared to the same day the previous year. Onions and potatoes also experienced price increases of 53.2 percent and 45.2 percent, respectively.
These price hikes have directly impacted the cost of a home-cooked vegetarian thali, which increased by 7 percent in March. The rise in prices of pulses, rice, onions, potatoes, and tomatoes pushed up the overall cost of a vegetarian thali, a meal that typically includes roti, vegetables, rice, dal, curd, and salad.
Given that higher vegetable prices directly impact consumers’ budgets, addressing inflation becomes a crucial challenge for the government in power.
Vegetable prices saw a significant increase of 30.25 percent in February 2024, compared to a contraction of 11.61 percent in the same month in the previous year.
Government Measures
In an effort to control food prices, the central government, led by the BJP, implemented various measures. These included bans on the export of onions and certain varieties of rice, as well as offering subsidized tomatoes to consumers.
India’s headline retail inflation has been steadily declining since September 2023 when it stood at 5.02 percent, dropping by 181 basis points in a month.
Since July 2023, numerous steps have been taken to contain prices, such as selling rice and wheat under the Open Market Sale Scheme, subsidizing the retail cost of tomatoes, and extending the ban on onion exports indefinitely.
Additionally, the government has introduced the ‘Bharat’ brand variants of wheat flour and pulses to protect consumers from price fluctuations. Products like Bharat Atta and Bharat Dal (chana dal), launched in the latter half of 2023, are sold by government agencies at fair and affordable prices.
The Reserve Bank of India has also been closely monitoring inflation. Despite lower Consumer Price Index numbers in recent times, the central bank has kept the interest rates unchanged, citing the need to bring inflation down to the mandated target of 4 percent.
While CPI inflation has remained within the RBI’s tolerance range of 2 to 6 percent for six consecutive months, it has surpassed the medium-term target of 4 percent for 53 consecutive months.
On April 5, RBI Governor Shaktikanta Das expressed concerns about significant vulnerabilities in food inflation, noting that such price pressures have been hindering the ongoing disinflation process and posing challenges in achieving the target.
In February, Finance Minister Nirmala Sitharaman stated that India’s retail inflation has stabilized, highlighting the effectiveness of the government’s measures. She added, “Prices of essentials like atta, dal, onions, and rice have come down.”
