New Delhi: Within a month of assuming office, the Modi government has been assailed by a spate of bad economic data. Last week, crude prices hit a nine-month high on Iraq crisis pressuring the rupee.
And now, rising food prices have emerged as one of the big challenges. Costs for food items, particularly vegetables and fruits, have added to inflationary pressures. Higher potato and onion prices pushed up food inflation to 9.50% in May from 8.64% in April.
Potato prices jumped 19% in May. Onion prices have been hit because of a strike in Nashik, one of the country’s biggest onion markets. And 45% of onion produce comes from the states of Maharashtra and Karnataka and if supplied from these two key states are hit, onion prices tend to rise.
Finance Minister Arun Jaitley, preparing his first budget to be presented in the second week of July, blamed “speculative hoarding” on fears of deficient rainfall for the rise in food prices.
The weather department has predicted below average rainfall between June-September this year, which could hit summer crops such as rice, corn, soybean and cotton, exacerbating price pressures and impacting economic growth.
The government’s subsidy bill is also likely to rise, worsening the fiscal balance. India imports nearly 80 per cent of its oil. Wholesale fuel prices rose 10.53 per cent in May from a year earlier, accelerating from 8.93 per cent in April.