This article was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been republished here. To subscribe to The India Cable, click here. Stickiness in food inflation had made the UPA government unpopular back in 2013. Double-digit food inflation was hurting the poor and the Opposition had begun to taunt former Prime Minister Manmohan Singh for his failure, especially since he is an eminent economist, to control food prices. Prime Minister Narendra Modi is no economist but he has boasted in the past that his government does better than Manmohan Singh on inflation. But Modi was blessed with falling oil, food and metal prices in the years after 2014, which moderated overall inflation.However, Prime Minister Modi’s honeymoon with low to moderate inflation is all but over and the stickiness in food inflation is worrying the Bharatiya Janata Party a great deal as several state elections draw closer, along with the general elections next year.Just as food inflation had peaked in the second half of 2013, the trend appears to be repeating in 2023. July and August have seen double-digit food inflation, as India suffered an 11% monsoon deficit for the first time in eight years. Inflationary expectations are clearly on the rise, as the government imposes export curbs on a range of food items. Prices of milk, pulses and edible oil have generally been structurally on the higher side for quite some time now.Indeed, if food inflation proves to be sticky in the months ahead, it will raise political headwinds for Prime Minister Modi and the BJP during the crucial assembly elections in Madhya Pradesh, Rajasthan, Telangana and Chhattisgarh. The BJP knows that high energy prices, especially that of cooking gas, hurt the party badly in Karnataka, and it cut LPG prices by Rs 200 recently. But prices of LPG, diesel and petrol remain quite high.Once inflationary expectations build up in the economy, it is very difficult to put the genie back in the bottle. The Ukraine war had created the first round of very high inflationary expectations last year. Both food and energy prices soared and there was an unprecedented spike in global inflation. The advanced economies were hit hard and are still grappling with high inflation via blunt monetary policy tools. It may take a while for global inflation to flag and India cannot escape the overall trend of higher inflation and lower growth.Though there seems to be some recovery (contested by economists like Ashoka Mody) in the April-June quarter, the reality is that India’s GDP has grown annually only about 3.5% for four years from 2019-20 to 2022-23. So incomes have not really recovered significantly and inflationary expectations are getting entrenched even before a full recovery is underway. There is ample evidence from consumption patterns that the bottom 70% of the population, whose incomes were hit badly by the COVID-19 pandemic, have not recovered yet.On September 15, Mallikarjun Kharge told the prime minister to stop diversionary tactics and focus on inflation, because the 20% poorest Indians are bearing the brunt of the problem, brought on by the “grand loot” conducted by his government.A nationwide survey by the Centre for Monitoring Indian Economy shows that people expect prices to remain high and even their expectation of future income growth is relatively low. This reflects the broader sentiment, even as self-congratulatory claims of India being a beacon of global growth abound.One can’t help but feel that Prime Minister Modi, heady with the G20 success, is in a mood to launch a campaign like India Shining, which his mentor L.K. Advani had unleashed in 2003 on the back of an incipient economic recovery. Is the BJP again creating a bubble via its own self-seeking narrative? Of course, the India of 2023 is not the country it was in 2003. Today, significant sections of voters seem to be willing to suffer a great deal of hardship before the promised entry into ‘Amrit Kaal’ (era of great prosperity). But equally, voters tend to change their minds overnight, and they will keep political parties on tenterhooks in the months ahead.
