In India, Modi-led BJP government’s decision to slash cooking gas prices by Rs 200 a cylinder is a huge sop ahead of assembly elections in five states later this year and the Lok Sabha polls in the spring-summer of 2024.
The price cut is significant, especially for the poorest families who are covered under the Ujjwala scheme which already gives them a subsidy of Rs 200.
For them, the price cut amounts to Rs 400 per cylinder. According to official data, nearly 50% of rural households use LPG cylinders as their primary source of energy, while the same holds true for over 90% of urban households across India.
The sudden move to cut prices by the government shows how inflation and the rising prices of food in particular, have rattled the government as it could become a major election issue.
In July, India’s annual retail inflation rose to its highest in 15 months at 7.44 per cent as vegetable and cereals prices skyrocketed. This was against all market expectations.
Food inflation hit a massive 11.51% in July as compared with 4.55% in June. Retail food inflation was at its highest since January 2020. The worst hit have been vegetables, with inflation rising by a huge 37.34% after falling 1% in the previous month.
Household budgets have been under strain with prices of essentials like tomatoes, onions, peas, garlic and ginger, more than doubling in the last few months. India’s central bank, the Reserve Bank of India, has also raised its inflation forecast to 5.4% for the current financial year, up from 5.1% earlier, again citing food prices.
All of this could have a direct bearing on the elections and that explains why the central government decided to step in at this time. It is also because the Congress has announced LPG cylinders at Rs 500 a cylinder in Madhya Pradesh, one of the key states where polls will be held this year.
The same price is already in effect in Congress ruled Rajasthan thanks to a government subsidy. This is another poll bound state. For perspective, even after all the subsidies and price cuts, a gas cylinder will still cost around Rs 700 a cylinder for the poorest families in Delhi.
So the Congress moves in Rajasthan and Madhya Pradesh would certainly have had a bearing on the BJP government’s moves at the centre.
Modi's message
The decision to slash prices has another important vote bank target- women. Soon after the announcement, Prime Minister Modi tweeted in Hindi — “the festival of Raksha Bandhan is a day to increase happiness in our family. The reduction in gas prices will provide more comfort to sisters in my family and make their lives easier. May every sister of mine be happy and healthy, this is my wish from God”.
According to ‘The Indian Express’, BJP leaders had given feedback to the party top brass that women voters- who form a key vote bank for the party- were extremely unhappy with rising prices.
The party is clearly nervous ahead of the state elections especially in states like Madhya Pradesh where is faces a 20 year anti incumbency.
In order to attract women voters, Chief Minister Shivraj Singh Chouhan has also announced domestic gas cylinders for Rs450 to women covered under his flagship Ladli Behna Yojana “for the holy month of Sawan”, saying a permanent system would be developed later.
What this also underlines is that the real issues in the next general elections may have more to do with the basic challenges people are facing like rising prices.
Landing on the moon and a successful G 20 summit make for good headlines and certainly make the nation proud, but for the common man, it is the prices of essential goods that will matter the most.
For the Modi government, this becomes even more crucial as it seeks a third term in office. More steps may have to be taken over the next few months to ease the burden of rising prices on citizens. Economics will be all about politics for a while.
