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Analysis – Modi's popularity key to selling food aid cuts ahead of India elections

By Aftab Ahmed and Krishn Kaushik

NEW DELHI (Reuters) – India’s Prime Minister Narendra Modi moves to effectively effectively bolster state elections ahead of next year’s state votes and general elections Cutting the rations of the poor in half 2024 is fiscally sound, but politically a lot depends on whether the charismatic leader can sell it to voters.

Subsidizing food and other items is key to winning elections in India, where food aid is a legal entitlement for more than 82 million people in the past800 got extra 5kg free rice or wheat months because of COVID- ruined their finances.

However, the free food program has cost the government approximately 47 billions of dollars, exacerbated the fiscal deficit, and drained government coffers Wheat stocks fell to multi-year lows.

From January, India will stop the extra 5kg food aid per person distributed during the COVID-19 pandemic and hand out 5kg free Food r a year, but reducing populist measures before elections is risky.

Modi’s Bharatiya Janata Party (BJP) won a record victory in Gujarat this month and is widely expected to win the next general election. Analysts say reality has given him more freedom to enforce fiscal discipline. The Center for Policy Research, a think tank, said of the decision to reduce the food programme.

The government hopes to save nearly $20 billion dollars a year by ending the COVID free food program.

Finance Minister Nirmala Sitharaman will present the budget for the next fiscal year on 1 February. A government source said the move to end the COVID-era free food scheme would reduce the government’s subsidy burden by about 30 next financial year and help its Rein in the fiscal deficit faster than expected.

Spending on the top three items of food and fertilizer next fiscal year could rise from nearly 5.5 percent in the current fiscal year ending in March, government sources said. reached trillion rupees.

Graphic: Three major subsidies in India –

This The official added that the fiscal deficit target of 2024/20 would be from The 6.4% for the current fiscal year is down at least 50 basis points.

Modi is trusted by voters

A few months ago, with the easing of COVID restrictions, some economists hoped that the food program would end. The government said last week that the scheme would end in December and be replaced by food subsidies under a pre-COVID law, which would be free for a year.

India’s poor have guaranteed food under 10 years of age considering it a law of entitlement.

“Reducing effective food allocation per capita from 19 kg to 5 kg is clearly not Populist,” said Subhash Chandra Garg, who retired as India’s finance minister three years ago.

“However, this additional food allowance is clearly not required to meet caloric needs. So if you can sell the idea that the poor will get what they need to meet their real food needs, ie free per person 5kg, which might offset the negative impact.”

Modi is known to be a master at getting the message he wants to send to voters, and the fact that he has no obvious challenger in the country has something to do with him Help, says poll founder Yashwant Deshmukh ing agency CVoter Foundation.

Modi’s approval rating is around 50%, compared to About 2016 percent backed his closest rival, Rahul Gandhi of the main opposition Congress party, CVoter data showed.

“I think Modi has been carrying out most of his decisions because of his credibility and reputation,” said Deshmukh, referring to the 2016 caused widespread distress over moves such as banning high-value currencies, but he still won a lot of elections handily after that.

” That’s because people don’t doubt his intentions. If Without trust, it will be very difficult for any other leader to end a food program like this before elections.”

But senior BJP leader and ex-minister Ravi Shankar Prasad Says the decision to reduce food aid should not be tied to elections or politics.

“This started when COVID emerged. Inclusion and empowerment of the poor were important factors in Narendra Modi’s government,” he said.

Food subsidies

Nine states to hold elections before national polls in a year. A scheme to provide free housing and cooking gas for the poor helped the BJP defeat Congress in the last general election.

Changes in food handouts mean total government subsidies for food, fertilizer and fuel will drop by 30% to 4 Below trillion rupees ($50.27 billion) next fiscal year, two government sources said.

One of the sources expects the government to reduce the fiscal deficit by at least 47 basis points to 5.9% of GDP. The second said food subsidies in the next financial year may drop to around Rs 2 trillion in the next fiscal year from nearly Rs 3.2 trillion in the current year.

India’s ex-chief statistician Pronabsen says he extends COVID food scheme, government warehouses will run out of grains closer to general elections.

“If you have to stop it in 2024,” Sen said.

($1=82.8750 Indian Rupees)



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