“They cut money, they only think about themselves,” fumed the 70-year-old as she searched a Mumbai market for the cheapest options. India’s poor have already been hit hardest by the country’s strict lockdowns over the coronavirus pandemic. Now, they are bearing the brunt of rising food costs as Russia’s war in Ukraine sparks sharp gains in commodity prices around the world. For the Modi government, the stakes could not be higher. Controlling inflation is crucial in a country where the price of onions can reportedly decide elections, as it did in 1980 when former prime minister Indira Gandhi won after her opponent oversaw a spike in the cost of the vegetable. India’s headline inflation hit an eight-year high in April at 7.79 percent from a year earlier, before easing slightly in May to 7.04 percent. However, it remains above the upper end of the central bank’s target range of 6 percent and vegetable costs continued to rise in May, rising 18.26 percent year-on-year. “We see upside risks from food inflation,” Goldman Sachs said in a research note.

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In response, the Modi government cut fuel taxes, while the Reserve Bank of India began raising interest rates for the first time in nearly four years. But those efforts came too late to prevent further price increases, analysts said. “I think the RBI was a bit complacent and the government too. The focus had just come into focus [economic] growth,” said Shumita Deveshwar, senior director of India research at TS Lombard. The rise in inflation coincided with the withdrawal of the central bank’s pandemic-era relief measures and a heatwave that hit India’s wheat crop. The RBI cut its gross domestic product growth forecast for the year ending March 2023 to 7.2%, from 7.8% in February. In response to rising food prices and crop damage, New Delhi has curbed wheat exports and announced a cap on sugar shipments as well as cooking gas subsidies for low-income households. The government’s excise duty cuts on petrol and diesel are expected to reduce inflation directly by 0.2 percentage points and indirectly by 0.5 percentage points, according to HSBC.

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But the fiscal cost of fuel tax cuts is steep — HSBC estimates Rs1 trillion ($13 billion) in lost government revenue. New Delhi also said it would help farmers by doubling fertilizer subsidies, straining public finances. In total, economists estimate the new fiscal measures will cost the state Rs 2 trillion — equivalent to at least 0.5 percent of GDP. For the government, “it’s definitely a tough balancing act now,” said Sonal Varma, Nomura’s chief economist for Asia excluding Japan. This is on top of Finance Minister Nirmala Sitharaman’s budget in February, which aimed to increase capital spending by a third to about $100 billion through infrastructure spending.

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Sanjiv Bajaj, president of the Confederation of Indian Industry, one of the country’s largest business associations, said the government and the RBI were approaching inflation in a “hands-on” way. “You don’t want to kill the gold rush that lays the eggs, so they have to balance growth with inflation,” Bajaj said. However, half of respondents to a recent CII survey cited rising import costs as a concern after the rupee hit a series of record lows against the dollar this year. The biggest problems facing the Indian industry were “inflation and international uncertainties,” Bajaj said. But support for the BJP has been sustained despite a history of extreme price sensitivity among voters, said Neerja Chowdhury, a political commentator in New Delhi.

The ruling party’s combination of Hindu nationalist rhetoric and a strong emphasis on welfare benefits have helped boost its popularity despite the economic shock of the pandemic. The BJP has swept a number of state elections this year. But he added: “There is a limit to people’s tolerance. Here’s why [the government] reduction of duties on petrol. A lot depends on how they handle the situation.” There are signs that some voters, like Amara, who is already cutting back on vegetable purchases, have had enough. They feel abandoned by the government, a feeling that threatens to increase with the onset of the monsoon season, which even in times of low inflation usually leads to higher food prices. “This is all because of the politicians,” Amara said. “[They are not even] looking at the rise in prices’.