On tackling runaway inflation, an area where the UPA administration’s consistent failure in its second term is a reason being cited for its electoral rout, the NDA government has a ready reckoner in the form of a detailed action plan — with 20 specific recommendations and 64 actionable points — even before it assumes office.
More pertinent is the fact that this report had been prepared by a panel headed by PM-designate Narendra Modi in his capacity as Gujarat chief minister just over three years ago and was submitted in March 2011 to former PM Manmohan Singh.
The recommendations, including reforms of the APMC Act, liberalisation of agri-markets, along with an unbundling of FCI operations of procurement, storage and distribution, will form the blueprint for the NDA government’s supply-side attack on inflation, according to a BJP economic cell representative. Consistent with the stand that the BJP top brass had maintained in the run-up to the election that the problem of spiralling inflation is specifically on account of supply-side bottlenecks and that raising interest rates, while being ineffective in tackling core inflation (non-food, non-fuel inflation), only served to dampen a demand-led recovery. The BJP’s hard stance against FDI in multi-brand retail notwithstanding, the recommendations include fostering competition by way of promoting retailing through the “organised sector and cooperatives”.
Despite being slightly dated, what makes the report relevant is that none of the key recommendations was taken up by the UPA government for implementation, something that the BJP top brass had complained about subsequently. And more importantly, despite a tight interest rate policy maintained by the Reserve Bank of India (RBI), inflation has again started to rear its head, with the latest year-on-year inflation estimates for March showing a spike in retail inflation on higher food costs.
Analysts say the risk of less-than-normal monsoon rains this summer will call into question assumptions that the worst is over on the inflation front.
The focus of the new government, according to BJP economic cell leaders, will be on addressing supply-side issues rather than trying to curtail inflation via monetary policy instruments and hiking interest rates.
The Working Group on Consumer Affairs headed by Modi was constituted on April 8, 2010, and the report was finalised in January 2011. The other members of the panel included the chief ministers of Maharashtra, Andhra Pradesh and Tamil Nadu. Unlike the usual practice of voluminous reports, the Modi committee report