Inflation and food security: Facts versus propaganda

This is the third and concluding part of the article on the propaganda surrounding inflation in India.

Under the UPA, retail inflation was more than 9% in 22 of the 28 months from January 2012 to April 2014. During this time, inflation even crossed into double-digits, 9 times. This was largely due to irresponsible fiscal policies, crony capitalism, and policy paralysis. Fuel inflation is a complex issue due to the linkages with global Oil prices. However, the Modi Government has been forthcoming and transparent in its pricing policies, accounting standards and also in how it is using its cess collections for the benefit of the nation as a whole. No one should forget that Congress left unserviced Oil bonds of over Rs 1.5 lakh crore, which are being serviced by the Modi government. The Congress earned political mileage by burdening future generations, these oil bonds.

On November 3, 2021, the Central Government cut the excise duty on Petrol and Diesel by Rs 5 per litre and Rs 10 per litre, respectively. On May 21, 2022, the Modi government, to further ease the burden on the common man, reduced the excise duty on Petrol and Diesel by Rs 8 and Rs 6 per litre respectively, which effectively means that in the last 6 months, the reduction in excise duty by the Central government has been Rs 13 and Rs 16 per litre, on Petrol and Diesel, with a revenue implication of well over Rs 1 lakh crore for the Central government. The entire cut in price was on cesses, so there was no impact on revenues of States. After the Centre slashed excise duty on Petrol and Diesel in November 2021, all Bharatiya Janata Party (BJP) ruled States also cut value-added tax (VAT) on fuel by anywhere between 13-21%. However, Opposition ruled States did not reduce their taxes on fuel by even a single penny. These states are Andhra Pradesh, Kerala, Maharashtra, Tamil Nadu, Telangana, and West Bengal. Jharkhand reduced prices for certain segments, not for all. Chhattisgarh reduced VAT by a token 1% and Rajasthan by a measly 4%, while Delhi reduced VAT on Petrol but not on Diesel. It is nothing but rabid hypocrisy on the part of Opposition ruled States to expect the Centre to keep cutting excise duties, while these Opposition leaders are themselves refusing to cut VAT in their own States, by even a single penny!

Speaking of edible Oils, to provide relief to consumers, the Modi government reduced Customs duty on Crude Palm Oil from 35.75% to 8.25%. On Sunflower and Soybean Oil, the Customs duty was reduced from 38.5% to 5.5%. These duty reductions provide relief in excess of Rs 20000 crore.

Customs duty on Masoor was reduced from 30% to 10%, giving a yearly relief of Rs 1000 crore, while Customs duty on Steel was rationalised significantly. Further, Customs duty was exempted on Iron and Steel scrap, while Customs duty was also rationalised on Copper scrap. In addition, anti-dumping duties were revoked on various kinds of Steel. This provided significant relief to the metal industry. In textiles, Customs duty on key raw materials like Caprolactam, Nylon Chips and Nylon Yarn were rationalised. Anti-dumping duty was revoked on key raw materials like viscose fiber, PTA, other fibers and yarn, to make available these raw materials to industry, at a reasonable cost. As Covid-19 relief measures, significant exemption from Customs and GST were provided to medicine and medical equipment like Oxygen concentrators and ventilators.

Between 2020 and 2021, approximately 38 lakh MT of free food grains were provided every month to 81 crore beneficiaries under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). This year as well, the government will be providing free food grains till September 2022. Under GST, the weighted average rate has come down to 11.6% according to the RBI as compared to the revenue-neutral rate (RNR), as recommended by the RNR Committee, of 15.3%.

According to P Chidambaram, the Modi government has earned Rs 26.5 lakh crore from fuel tax collections between 2014-2021. He adds that the total outgo on free food grain, cash allowances to women, PM-Kisan and other cash transfers is “no more than Rs 2.25 lakh crore — which is less than the annual fuel taxes collected by the Centre alone.” These numbers posed by the former Finance Minister are nothing but a vicious bunch of lies. The outlay on PMGKAY alone is Rs 3.4 lakh crore while under PM-Kisan, over Rs 2 lakh crore has already been given to over 10 crore farmers. One is not even counting the subsidised gas cylinders given under PM Ujjwala Yojana or close to Rs 1 lakh crore that is being spent on giving free COVID vaccines to those who can’t afford it, or the huge amount of money being spent to give free health insurance under Ayushman Bharat, to the marginalised sections of the society.

According to the RBI, the total developmental expenditure by the Central government during the period 2014-22 was a whopping Rs 90,89,233 crore (Rs 90.9 lakh crore). This included more than Rs 26 lakh crore in the form of capital expenditure to modernise infrastructure and create productive assets, Rs 25 lakh crore for food, fertilizer and fuel subsidies and Rs 10 lakh crore on social services such as health, education, affordable housing, etc.

It is clear then, that the collections from the fuel tax have been put to good use as developmental expenditure, by the Modi government. It is unfortunate that a former Finance Minister (P.Chidambaram), would miss out on these basic data points either due to sheer oversight or deliberate ignorance. Either way, it exposes Congress and its falsehoods. The hard truth is, as compared to Rs 90.9 lakh crore spent on developmental expenditure by the Modi government in the last eight years, the previous Congress dispensation spent only Rs 49.2 lakh crore over a 10 year period, from 2004-2014. So to cut a long story short, while the erstwhile Congress regime behaved like the reckless, prodigal son and did not even bother to regret or repent for its recklessness, the Modi government has repaired and reinvigorated the Indian economy, with Prime Minister Narendra Modi taking the bold lead in combining the best of both–Welfarism and Unrelenting Reforms.

Ukraine provided 42% of the world’s Sunflower Oil exports in 2019 – aptly, as the Sunflower is an iconic national symbol. The country also provided 16% of the world’s corn exports the same year, nearly 10% of barley exports, and has of course been a major wheat exporter. A “Black Swan” event like the Russia-Ukraine war in 2022, has, however, completely changed the food map of the world. Most livestock farmers do not have enough feedstock and grains and are shutting down their mills, with many Pig farms looking to shut down, as pork prices are slated to shoot through the roof. Mills in Southern Italy and elsewhere in Europe have shut down due to the naval blockade in Black Sea, which has led to blockade of grain supply. Egypt, one of the world’s largest wheat importers is now trading fertilizers for low-quality Romanian wheat as it cannot afford wheat from Ukraine or elsewhere due to a steep rise in freight costs. Serbia, the world’s 9th largest Corn exporter, has banned Corn exports. Kazakhstan has banned export of any form of food shipments. The USA, for months together, has suffered from a shortage of baby formula. To cut a long story short, the world in 2022, has been witnessing a global food crisis of unimaginable proportions, with global food prices at their highest ever since the 1970s. Amidst these challenging times, India has been the granary of the world and has reached out with “food-aid” to neighbours, right from Bangladesh and Nepal, to countries elsewhere like Myanmar, Afghanistan, and Sri Lanka. India’s food security has been the product of PM Narendra Modi’s single-minded focus on being self-reliant. Critics who compare India with Sri Lanka forget that the total size of Sri Lanka’s economy is barely $80 billion, whereas India is an economic giant with a GDP of $ 3 trillion and counting. The total exports of Sri Lanka are hardly $15 billion, whereas India’s goods and services exports are a massive $ 670 billion. The percentage rise in fuel and food prices in India, despite the unrelenting global challenges, have been far, far lower than comparative peers. Schemes like Pradhan Mantri Garib Kalyan Yojana (PMGAY), which provide free ration and PM Ujjwala Yojana which provide subsidised gas cylinders, have ensured that the Modi government has reached out to the last person standing, in terms of last-mile delivery. For instance, the Modi government announced on May 21, 2022, that the Centre will give Rs 200 per gas cylinder to over 9 crore beneficiaries of Pradhan Mantri Ujjwala Yojana this year. Beneficiaries will receive the subsidy on up to 12 cylinders. This will have a revenue implication of around Rs 6100 crore a year, for the Centre. In a nutshell, be it food security or inflation, while the world is faced with the worst crisis in over 50 years, India’s performance has been excellent, due to the nimble-footed and people-oriented Modi government that has always been ahead of the curve.

The writer is an Economist, National Spokesperson of the BJP, and the Bestselling Author of ‘The Modi Gambit’. Views expressed are the writer’s personal.

According to the RBI, the total developmental expenditure by the Central government during the period 2014-22 was a whopping Rs 90,89,233 crore (Rs 90.9 lakh crore). This included more than Rs 26 lakh crore in the form of capital expenditure to modernise infrastructure and create productive assets, Rs 25 lakh crore for food, fertilizer and fuel subsidies and Rs 10 lakh crore on social services such as health, education, affordable housing, etc.