MUMBAI/NEW DELHI: Indian Prime Minister Narendra Modi is facing a policy conundrum after losing ground in the recent election: how to control food inflation without resorting to export curbs and more imports – steps that have angered farmers, a sizeable voting bloc.
While Modi managed to retain power in a coalition government, his Bharatiya Janata Party (BJP) faces provincial elections later this year in two key agricultural states – Haryana and Maharashtra – that have strong farm lobbies.
Losses in the two states could diminish the BJP’s stature in the newly formed coalition government, weakening Modi as he seeks the consent of allies for policy initiatives for the first time since he took office a decade ago.
“It is true that farmers have been angry with the government,” said Rampal Jat, national president of the Kisan Mahapanchayat, or farmers’ council.
“Knee-jerk policy decisions to ban exports and allow cheaper imports into the country have undercut meagre agricultural incomes.”
To hold down consumer prices, Modi’s administration clamped down, starting in 2022, on exports of staples such as rice, wheat, sugar and onions.
India’s Modi prevails over allies in cabinet line-up
It also lowered tariffs on pulse and vegetable oils, allowing cheaper imports.
That did not go down well in the countryside, where more than 45% of India’s 1.4 billion people make a living from agriculture.
The BJP, which held 201 rural constituencies in the 543-member parliament, retained only 126 of them in the mammoth April-May election, according to a voter analysis.
Jat said farmers were made a scapegoat for the government’s inability to manage inflationary pressures. Since higher inflation was one of the factors that helped Modi sweep to power for the first time in 2014, his administration has focused on taming prices and used export curbs as a handy tool to rein in inflation.
Still, food inflation has remained at around 8% year-on-year since November 2023, largely because of higher fruit and vegetable prices, pushing up overall retail inflation above the central bank’s medium-term target of 4%.
American Dollar Exchange Rate