Indian Prime Minister Narendra Modi is facing a policy challenge after losing ground in the recent election: how to control food inflation without resorting to export curbs and more imports, which have angered the country’s sizeable farming community, an important voting bloc.
While Modi’s Bharatiya Janata Party (BJP) managed to retain power in a coalition government, it faces provincial elections later this year in two key agricultural states – Haryana and Maharashtra – that have strong farm lobbies. Losses in these states could diminish the BJP’s stature in the newly formed coalition government, weakening Modi’s ability to push through policy initiatives.
To hold down consumer prices, the Modi administration has clamped down on exports of staples such as rice, wheat, sugar and onions since 2022. It has also lowered tariffs on pulse and vegetable oils to allow cheaper imports. However, these measures have not gone 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 recent election, according to a voter analysis. Farmers’ groups, such as the Kisan Mahapanchayat, have criticized the government for “making farmers a scapegoat” for its inability to manage inflationary pressures.
Food inflation has remained around 8% year-on-year since November 2023, largely due to higher fruit and vegetable prices, pushing up overall retail inflation above the central bank’s medium-term target of 4%. This has put pressure on the Modi government to find a balance between controlling prices and keeping the farming community, a crucial voting bloc, satisfied.