Rising inflation, Iraq crisis may spoil Narendra Modi’s Budget plans

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Rising inflation, Iraq crisis may spoil Narendra Modi

New Delhi: Prime Minister Narendra Modi who came to power by promising ‘Achche din (better days)’ is facing a huge challenge. The inflation is increasing and the government does not know how to rein in. The worsening situation in Iraq has also multiplied the problem. The crisis in Iraq is likely to affect the global oil trade resulting in price rise.

During his election campaign, Modi had attacked the previous Congress-led UPA government’s inability to control inflation. He had promised that the new government would bring the prices down.

But, prices of all essential commodities have gone up since Modi achieved a landslide victory on May 16.

Rising inflation, Iraq crisis may spoil Narendra Modi's Budget plans

Prices of all essential commodities have gone up since Narendra Modi achieved a landslide victory on May 16.

According to a report in ‘Business Standard’, the Wholesale Price Index (WPI) based inflation has increased to 6.01 per cent in May 2014 from 5.2 per cent in April 2014. The inflation for three major sub-groups was higher, while core inflation also moved up in May. The inflation for primary articles increased from 7.1 per cent in April 2014 to 8.6 per cent in May 2014. The inflation for fuel and power group also moved up to 10.5 per cent in May 2014 from 8.9 per cent in April 2014, while the inflation for manufactured products galloped to 3.6 per cent in May 2014 from 3.2 per cent in April 2014.

The inflation for fruits, milk, egg, meat & fish, spices, tea, coffee, oilseeds, metallic minerals, mineral oils, electricity, paper products, chemical products, basic metals etc increased contributing to the overall rise in inflation in May 2014. On the other hand, the inflation for vegetables, flowers, crude oil, textiles items, machinery and machine tools etc eased in May 2014 from April 2014 level.

The inflation for food items (food articles and food products) increased from 6.3 per cent in April 2014 to 7 per cent in May 2014. Meanwhile, the inflation for non-food items (all commodities excluding food items) also moved up from 4.7 per cent in April 2014 to 5.7 per cent in May 2014. The core inflation (manufactured products excluding foods products) galloped to 3.4 per cent in April 2014 to 3.8 per cent in May 2014.

Railways Minister DV Sadananda Gowda has hinted that the railway fare may go up in the Railways Budget to be presented in a month. According to reports, Modi does not want to increase passenger fares and wants to increase freight fares.

But, increase in freight fares will automatically lead to commodities price hike. The Union Budget to be presented by Finance minister Arun Jaitley will also decide the direction of sluggish economy.

Addressing the BJP workers in Goa on Saturday, the Prime Minister has warned the people to prepare themselves to face some hard decisions in the interest of the country.

The infrastructure industry, which suffered the most under the UPA government, is hoping for some miracle under Modi. A big boost for infrastructure sector will result in more job creations and more money in the market. It can also lead to more inflation.

The stock market which rallied behind Modi is also showing signs of weakness a month after the Lok Sabha election results. Modi is facing a big crisis. If he manages to rein in inflation and accelerate growth, he can actually deliver his promise to the promise

 

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