Narendra Modi’s one promise that engineered his victory in the recent elections was dealing with the problems of inflation in India. The United Progressive Alliance (UPA) administration failed miserably in its efforts to tackle inflation in its second term. Highlighting what it can do to handle this issue in Asia’s third largest economy, the recently elected National Democratic Alliance (NDA) government has a detailed action plan that it is ready to set into motion. Even before assuming the office of the leader of India’s vast population, Modi handed outgoing Prime Minister Manmohan Singh a report detailing his plan to fight inflation with agriculture.
Heading the panel in 2011 with members of the NDA, Modi came up with 20 specific recommendations and 64 points that could be acted upon to deal with the issue. Among the 20 recommendations he included reforms of the Agriculture Produce Market Committee (APMC) Act, the liberalization of the agricultural markets and unbundling the Food Corporation of India’s (FCI) operations in procurement, and storage and distribution of food products. Representatives of the Bharat Janata Party (BJP) are confident that these moves are what India needs right now to tackle inflation from the supply side. Modi, who headed the panel for The Working Group on Consumer Affairs, was joined by the chief ministers of states like Maharashtra, Tamil Nadu and the now partitioned Andhra Pradesh. A report for the 10 month period from April 2010 to January 2011 claimed that, unlike traditional reports, it was a “precise document” that gave recommendations and 64 detailed actionable points that would ease the implementation process.
All through the electoral campaign the BJP and Modi maintained that the rise of inflation was particularly due to the increased narrowing of the supply side fueled with increasing interest rates. The UPA government was ineffective in tackling non-food and non-fuel inflation, to the extent that it lowered the options of a demand-led recovery. While Modi and the BJP’s stand firm against FDI in multi-brand retail, they recommended allowing competition by means of promoting retail through the organized sector and small scale firms.
For critics who question the validity of this report, seeing that it came in 2011, the more pertinent question is to ask why the UPA chose to neglect the recommendations by the BJP in the face of spiralling inflation. Complaints made by the BJP fell on deaf ears despite the Reserve Bank of India’s (RBI) tight interest rate policy and rising inflation, with an annual estimate showing a sharp increase in retail inflation on in terms of higher food costs. With agricultural produce being a pillar that supports this plan, analysts question if the worst is over on the inflation front. The risk of a comparatively lesser monsoon season could spell trouble in India. To try and deal it with another perspective in comparison to the one outlined is impossible. The report Modi submitted offered supply-side measures instead of battling inflation with monetary policies or hiking interest rates to fight inflation.
Modi’s report on tackling inflation based itself on using agriculture as the weapon to fight the war on inflation. Key recommendations included banning the continued trading of essential commodities, setting up a central price stabilization fund, and a system that involved ministers at both the central and state level to coordinate future policies. Of the 64 actionable points, specific instructions were given to develop a time-bound agri-marketing infrastructure that dealt with storage capacities in food deficit regions, cold chain and agro-processing. In a bid to make the fight against inflation legally stronger, the report suggested that offenses under Section 10-A under the Essential Commodities Act should be deemed non-bailable. Special courts were requested by Modi’s panel to be set up to let the law take its way in cases like these. In addition, a petition to increase the preventive detention period from six months to a year could significantly reduce black-marketing these products.
Modi’s top priority is to deal with inflation, and reports confirm that it is on the top of his to-do list. The report and the consequence of recommendations are crucial to Modi’s success as a national leader and it is hoped that the fight against inflation has the UPA collaborating this time around.
Opinion by Rathan Paul Harshavardan