The good news on the economic front is that consumer inflation is under control. At 4.23% in May 2023, it is set to go down further, providing the well-needed respite to the aam aadmi. And thanks to inflation staying within the RBI’s comfort zone of 4-6%, and likely to reduce further in the coming weeks, the Monetary Policy Committee of the central bank at its last meeting had felt no need to hike the benchmark rates.
Lower food inflation at this time of the year may be expected, but a lot would depend on the coming monsoon for this to remain in the comfort zone of consumers. Weather predictions still don’t paint a clear picture, but a truant monsoon could push up food prices. Nobody can control how the monsoons behave. More than 70 years after Independence nearly 50% of farmers still remain at the mercy of the rain gods, given the lack of irrigation facilities in nearly 40% of the farmlands.
Manufacturing too is on the upswing, with some of the boost in industrial activity being ascribed to the government’s liberal Production Linked Incentive scheme. Off-take of consumer goods however is yet to gain traction. A wait-and-watch mood prevails among the middle- and upper-income groups which are still emerging from the prolonged effects of the Covid pandemic.
However, overall consumer confidence is strengthening owing to the strong performance by the economy and the tapering of the retail inflation. Overall, the government has managed the nation’s finances with great prudence, keeping the fiscal deficit under check despite urgent demands arising from the two-year pandemic and the heightened threat at the northern borders, a welcome concession made even by the former finance minister P Chidambaram who otherwise, expectedly, is an unsparing critic of Finance Minister Nirmala Sitharaman’s stewardship of the Finance Ministry.
The RBI has forecast a 6.5% growth for the current financial year. Given that key State elections are due later this year and a general election sometime in April-May next year, the pressure to distribute goodies to voters could still play havoc with the fisc, especially when most political parties are now competing in offering all manner of lollipops to the voters.
Another dark spot is fuel prices. The Ukraine war is in a state of stalemate but the West Asian petro czars threaten to cut back production in order to keep the fuel prices high. Thus far, India has handled the post-Ukrainian war petroleum situation rather well but even the price of Russian crude cannot remain fully unrelated to the one set by the West Asian powers.
Overall, though, there is a case for optimism on the economic front even for the hard-pressed aam aadmi who is happy receiving freebies, from free power to free bus rides, free rations and periodic cash handouts due to fiercely competitive party politics.
