Rajasthan’s CM designate Bhajanlal Sharma’s number one problem is inflation

Rajasthan's new Chief Minister Bhajanlal Sharma.

Rajasthan’s newly-anointed Chief Minister, Bhajanlal Sharma, has his hands full with the desert state clocking the second-highest retail inflation rate at nearly 7 percent in November, primarily on account of a rise in prices of key food products.

The state’s inflation woes aren’t new. Rajasthan’s average inflation rate of 6.65 percent during April-November 2023 continues to trend above the national average of 5.43 percent during the same period.

When India’s overall retail inflation came in at a 15-month high of 7.44 percent for July 2023, Rajasthan topped the chart among all states at 9.7 percent. And, as per the latest data, India's headline retail inflation rate surged to a three-month high of 5.55 percent in November due to the combination of an unfavourable base effect and a rise in prices of certain food items.

Other states that clocked in higher inflation rates last month include Odisha, topping the list at a whopping 7.65 percent and Haryana which came in third at 6.78 percent.

The former Ashok-Gehlot-led Congress government in the state was well aware of Rajasthan’s inflation problem. In fact, in its Budget for 2023-24, the state proposed an ‘Inflation Relief Package’ of more than Rs 19,000 crore while continuing the Rs 7,500 crore value-added tax (VAT) reduction on diesel and petrol for the current year. More steps such as subsidised LPG cylinders and free domestic electricity were also rolled out by the past regime in a bid to reduce the burden of price rise on consumers.

Back in April, Gehlot’s government had also organised ‘Mehangai Rahat’ camps across the state, spanning over a month to ensure that the benefits of these welfare schemes reach the beneficiaries. But, despite these efforts, the spike in vegetable prices and poll-related expenditures kept Rajasthan’s inflation rates elevated. The issue of price rise in the state featured prominently in campaigns ahead of elections that took place on November 25.

Following this, on December 3, the main opposition party in the state, the BJP successfully wrested power from Congress in the assembly elections, winning 115 seats out of the 199 that went to polls.

Given that price rises, especially on key staples, pinch the consumers directly, inflation could become a key concern for Bharatiya Janata Party’s pick Sharma, who is expected to take oath on December 15.

Contrast Chhattisgarh
In sharp contrast to Rajasthan, Chhattisgarh’s incoming Chief Minister, BJP’s Vishnu Deo Sai, will be inheriting the governance of a state that has managed inflation better than almost all its peers so far in the current fiscal.

Data shows that the mineral-rich state’s average inflation rate stood at 2.76 percent during the first eight months of the current financial year, sharply lower than the national average. The state has shown remarkable progress in other economic metrics as well, clocking a growth rate of 8.46 percent in FY22 and is also seemingly on track to meet a relatively low fiscal deficit of 2.99 percent for 2023-24, below the central bank’s mandated target.

Another state that saw BJP’s victory, Madhya Pradesh has also been able to keep manageable inflation rates, registering an average of 4.26 percent till November 2023 for the current fiscal.

With general elections in India only a few months away, price rise, especially food inflation could become a central focus for political parties as seen in the run-up to the assembly polls across five states.

Even the central government has been consistently rolling out supply-side measures, including export curbs, in an attempt to keep a tight leash on food inflation, which rose to 8.70 percent in November from 6.61 percent in October. Finance Minister Nirmala Sitharaman on December 12 said that Indian consumers have to be prioritised when there are crop shortages in a bid to keep a lid on domestic prices of key staples.

Given, the concerns around food inflation and consumer sentiments as well as the impact it could have on electoral mandates, Rajasthan's exalted inflation rates are likely to keep the BJP government in the state on their toes.