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Modi government faces inflation challenge

India's month-old government has encountered its first challenge on the economic front -- containing inflation.

NEW DELHI: India's month-old government has encountered its first challenge on the economic front -- containing inflation.

The issue, which was a key campaign pledge of Prime Minister Narendra Modi’s camp during the election, is made even trickier with external factors such as a weak monsoon season affecting crops and political tensions in Iraq driving up fuel prices.

Modi was voted into power last month on the promise that his government would control inflation and revive the economy.

But with the main gauge of inflation -- the Wholesale Price Index -- at a five-month high in May and prospects of weak monsoon rains and a sharp rise in global crude oil prices pushing prices up, the government has its work cut out for them.

Critics say the Modi administration needs to solve the inflation problem quickly, or voters will soon be disenchanted.

Tariq Anwar, Nationalist Congress Party leader, said: "Because they had to win elections, they made false promises to people. Now that it is time to perform, they are making excuses that Congress' economic discipline is responsible for this. No excuses will work now, people want results."

But some observers say the Modi government is not lacking on commitment in tackling inflation, pointing to the prime minister's decision to postpone his Japan visit to concentrate on his government's first budget.

They add that the government has also imposed export controls on food commodities and sold off state rice supplies in a bid to keep a lid on food inflation.

However, they have yet to deal with traders who hoard stock while waiting for prices to rise -- a key driver of inflation which many Indian governments have attempted to control, but few have managed to achieve.

Observers say the government's litmus test will be when it presents its maiden budget in July.

D Raja, Communist Party of India leader, said: "We will have to wait for the Budget. In fact, the Budget will indicate what are the economic measures that the government is unleashing in order to put the economy back on track."

After an easy start, the Modi government is now facing its first major brush in the form of inflation.

If prices are not controlled in time, the euphoria of victory would not take much time to turn into one of disappointment. 

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