Modi understands the politics of economics
The government has postponed any decision on doubling gas prices
Whilst it is too early to judge whether the 31-day-old Narendra Modi government has got a grip on the economic issues scuttling or stumping the growth of the economy, it has shown that it is a government that can take rapid-fire decisions even if some, such as raising rail fares, are unpopular.
It hiked import duty on sugar from 15 to 40 per cent, doubled the level of ethanol blending with petrol and raised the minimum support price for paddy.
It also gave environment clearances to pending big-ticket projects worth Rs 22,000 crore and gave the green signal for setting up eight information technology manufacturing clusters to boost exports.
It also appointed an arbitrator in the case of Vodafone regarding the complicated issue of retrospective taxes. However, it seems to be fighting a losing battle against food inflation and has invited the wrath of the people and given fodder to the Opposition as onion prices are going up by the day. It is surprising that it has not been able to control the price of onions. Just asking the state governments to crack down on hoarders and taking vegetables and fruits out of the purview of the Agriculture Prices Marketing Committee, as Union finance minister Arun Jaitley did, will not bring down prices. One has not heard of a single hoarder being caught nor of any raids on places where onions have been hoarded.
The government has lost no time in understanding the politics of economics. For instance, the increase of import duty on sugar was ostensibly to enable the sugar barons to pay sugarcane growers their huge arrears, but it will earn them a lot of goodwill in the sugarcane-growing states of Uttar Pradesh and Maharashtra.
Though it would mean a rise of Rs 2 per kg of sugar for the consumer, it is not likely to burn a hole in the consumer’s pocket. The government has postponed any decision on doubling gas prices, as demanded by Reliance, the largest private-sector gas producer, thus sparing the consumer from a huge hike in petroleum products.
The BJP in all likelihood will have a different formula from the Rangarajan Committee’s and it has enough background on the issue. It had two leaders, Yashwant Sinha and Piyush Goyal, on the parliamentary standing committee on gas pricing and said it was flawed. Mr Goyal, who is at present minister in charge of the oil and gas portfolio, has reiterated this stand in recent interviews.
As in the case of oil and gas, the government needs to study sugar pricing as the sugar industry is one of the most inefficiently run, and pampered, industries, particularly in Maharashtra.