After recent electoral losses, PM Modi is grappling with the challenge of controlling food inflation without angering farmers through export curbs and increased imports. With crucial provincial elections in Haryana and Maharashtra looming, Modi must balance economic measures and farmer interests to maintain political stability and address rural discontent.
Electoral Losses and Policy Challenges
Modi’s Bharatiya Janata Party (BJP) saw a significant drop in rural constituencies in the recent election, retaining only 126 out of 201 seats. This decline reflects widespread dissatisfaction among farmers, who feel scapegoated for the government’s inability to manage inflation. The BJP, which managed to retain power in a coalition government, faces the risk of further losses in the upcoming provincial elections in two key agricultural states. Losses in Haryana and Maharashtra could diminish the BJP’s stature in the newly formed coalition government, weakening Modi as he seeks the consent of allies for policy initiatives.
Farmers’ Discontent
To control consumer prices, Modi’s administration implemented measures such as banning exports of staples like rice, wheat, sugar, and onions, and lowering tariffs on pulse and vegetable oils to allow cheaper imports. These actions have not been well-received in the countryside, where over 45% of India’s 1.4 billion people rely on agriculture for their livelihood. Farmers argue that these policies have undercut their already meagre incomes, leading to widespread discontent.
Rampal Jat, national president of the Kisan Mahapanchayat, criticized the government’s knee-jerk policy decisions, stating that farmers have been unfairly penalized. Food inflation has remained at around 8% year-on-year since November 2023, largely due to higher fruit and vegetable prices, pushing overall retail inflation above the central bank’s medium-term target of 4%.
Course Correction
Ahead of the assembly elections in Haryana and Maharashtra, the BJP will attempt to woo growers by tilting the balance in favour of farmers. Harish Galipelli, director of ILA Commodities Pvt Ltd, noted a realization that farmers cannot be endlessly penalized for higher inflation, and that urban consumers, who have deeper pockets, may need to bear higher prices.
Analysts and industry experts suggest that some immediate decisions, such as easing export curbs on certain commodities, are imminent. Longer-term measures, including boosting crop yields and raising government-mandated support prices by larger margins, are also under consideration. The government announced an increase in support prices for summer-sown crops, but the raises were smaller than expected and unlikely to placate farmers.
Specific Commodity Issues
Rice: The government is examining the possibility of easing export restrictions on rice. Despite a 7% increase in rice prices over the past year, due to higher government-set support prices, state granaries are overflowing with rice stocks. With forecasts of good monsoon rains, experts like Ashok Gulati suggest the government should allow rice exports to cut back inventories.
Onions: In Maharashtra’s onion-growing regions, the BJP lost all eight seats, reflecting anger over export curbs. Farmers like Uttam Kahandal have been unable to recover production costs due to these restrictions. Maharashtra CM Eknath Shinde has requested the federal government to remove onion export curbs and instructed state agencies to buy the crop at government-set support prices.
Broader Implications
The BJP’s approach to addressing agrarian distress will be crucial for its performance in the upcoming provincial elections and the general election in 2029. During Modi’s decade-long rule, government-fixed minimum purchase prices for key crops like soybean and cotton have seen modest increases compared to the previous decade. If the government fails to respond effectively to the ongoing agrarian distress, it could face significant challenges in maintaining its political dominance.
Farm policy expert Devinder Sharma warns that if the new government does not make serious efforts to address agrarian distress, it may need to prepare for a stint in the opposition. The BJP’s ability to balance consumer and farmer interests will be a key factor in its future electoral success.