Multiple factors impact the mood of the electorate but one constant in almost all polls is the prevailing consumer price inflation. Particularly the price of vegetables, especially onions and tomatoes. For the common consumer the broader state of economy matters little if his daily essential needs begin to pinch his pocket. Take the recent poll in America. By all accounts, the US economy is doing very well, growing at over 2% annually. This is remarkable for the world’s biggest economy. Indeed, job growth in the Biden years has been excellent. Yet, one major reason, along with immigration — their Bangladeshis — invariably cited for the defeat of Democratic presidential candidate, Kamala Harris, is the consumer inflation. Prices of milk, bread and other daily food items have ruled inordinately high in recent months. In short, when voters get stressed about daily expenses, compromising on one or the other food item to make ends meet, they register protest against the ruling dispensation. Therefore, the incumbent coalitions in Jharkhand and Maharashtra need to be wary of the consumer resistance while seeking re-election, given that the price of veggies, especially onions and tomatoes , is hurting voters. In certain places onions are selling at Rs 80 per kilogram. Prices have doubled with the onset of monsoon.

Though it is a recurring annual phenomenon for vegetable prices to become costlier in the monsoon period, there is often a mismatch in demand and supply of onions, with regional Maharashtra politics intruding into the straightforward equation. Well aware of the onion effect on voters, the central agriculture produce marketing agencies have sought to ease the onion situation through a nation-wide network of fair price shops. Yet, this hasn’t had a salutary effect on onion prices sold by private vendors. Hopefully, there will be a respite soon from high vegetable prices once the fresh crops enter the market. For the record, vegetable inflation in September and October months rose 36% and 42% respectively. According to National Statistical Organisation, consumer inflation rose to 6.2% in October as against 5.5% in the previous month. The October inflation was the highest in 14 months. Given that the Monetary Policy Committee of the Reserve Bank of India has a specific remit to ensure that consumer inflation rules within the 4% to 6% range, with latest October month figures breaching limit, it is unlikely that the MPC will contemplate easing the prime lending rate anytime soon. This may shatter the hopes of equity markets for a domestic fillip now that the foreign investors are pulling out billions, but on sober reflection even at the lower ends of Sensex it rules far above anything it has done before. Consumer interests ought to remain foremost for policy-makers. Indeed, the newly-constituted MPC in its first meeting in October had implied a rate cut in its next meeting due in December. It said that it had switched its stance from the hitherto “accommodative” to “neutral”, causing the share market bulls to espy a PLR cut in the next meeting of the MPC in December. The breach of the 6% cap for consumer inflation in October seems to have virtually pushed back further the time-line for basic rate reduction by the central bank. Indeed, the MPC may have to revise its sums, considering that it had projected 4.8% consumer inflation in the third quarter and 4.2% in the next. Meanwhile, the debate whether MPC charter be unshackled from the rather restrictive consumer inflation control, which undoubtedly is impacted by several factors other than money supply, and linked to broader growth concerns can now be set aside for the foreseeable future. No party can risk popular wrath, leaving consumer inflation unchecked.

Aside from the spurt in consumer inflation, there are other indications calling for caution on economic growth. Though the official projection puts GDP growth next financial year at over 7%, both World Bank and IMF reckon it to hover between 6.5% to 7%. A well-regarded ratings agency has projected it to be 6.8%. Despite the festival season boost in sales of consumer durables, most manufacturers have projected modest growth next year. Several surveys have indicated that the rural markets have picked up while urban markets remain markedly sluggish. Private sector capital outlays still remain modest. Same is the case with credit growth by banks. Savings rate growth in banks remains distant from their highs registered a decade or so ago. Maybe the average Joe is putting his meagre savings in mutual funds. Which alone explains that despite the FIIs pulling out Rs 80,000 crore from the markets in October, they barely felt a ripple. For, mutual funds are investing millions of ordinary Indians’ savings in equity markets with their explicit consent. Indeed, the new issues by companies of small, medium and big sizes have also soaked up funds from the open market, testifying to the spread of the equity culture. In sum, despite some red signals both domestic and global, the economy may be on course to grow at well above 6% in the next financial year. With periodic elections intruding into the normal process of governance, a six-plus percentage growth is nothing to be sniffed at.