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The price of staples like milk and cooking gas is rising in India, accumulating pressure on consumers already struggling with the economic shock of the pandemic and poses a new challenge for the Narendra Modi government.
India recorded retail inflation of 6.3% in June and May, as rising food and fuel costs pushed the consumer price index above the 6% target. central bank for the first time this year. Wholesale inflation hit a record high of almost 13% in May.
Economists fear India could fall back into a fugitive price-raising cycle for years it suffered from its growth and presented a political burden for the country’s leaders.
The prospect of rising prices, as inflation marks higher globally – arrives despite an uncertain growth outlook. Hopes for a quick rebound from a historic recession last year faded with a brutal second recent wave of Covid-19 infections.
“It’s very complicated for the country right now as you are facing a pretty serious growth problem,” said Priyanka Kishore, head of India at research firm Oxford Economics.
Economists think part of the increase reflects blockchain-induced supply chain disruptions, but believe it could also lead to a longer-lasting disruption as commodity prices rise globally.
This has put pressure on the authorities to act, as Indian voters are known to have resorted to governments presiding over inflationary periods.
Although the Reserve Bank of India has left interest rates unchanged for a year, focused on reviving growth, some economists believe a rate hike is more likely in the coming quarters.
Central and state governments are also facing calls to reduce fuel taxes. “Clearly, higher fuel costs have translated into all segments,” the rating agency CARE wrote in a note. “The government needs to start lowering taxes.”
Price pressures have driven companies to raise prices.
Mother Dairy and Amul, two of the largest milk brands in the country, increased prices by 2 rupees per liter this month, equivalent to 4%. Companies cited double-digit increases in wholesale, packaging and logistics costs.
This has affected the middle and poor classes of India, who have borne the brunt of the economic shocks induced by the country’s pandemic. Rising food prices, for example, have worsened food insecurity for vulnerable populations.
Mohammad Huseini, a 48-year-old man who runs a dairy stall in Bombay, said his sales have fallen 35% since the start of the pandemic.
“I see people buying fewer quantities because people have lost their jobs,” he said. “People don’t have money to spend, but milk is essential, so people have to buy it even if the cost has gone up.”
Bittu Gupta, a 55-year-old fruit seller, usually likes to buy three liters of milk a day to feed his five children, but is reduced to two. They are served tea in the morning and glasses of milk to go with bread for dinner. “We’re giving them a little less, but they need it,” he said. “Everything is going up.”
Sagarika Mukherjee, a 27-year-old maid, buys just enough to give her ten-year-old son a bowl of oats, giving up small pleasures like tea.
“The price of everything (vegetables, rice) is rising every day,” he said. “It is difficult for the poor, but the government does not care about us. We give in to our faith. “
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