NEW DELHI: Violence erupted against rising food prices in one of India's poorest states yesterday, pushing more political pressure on the government to place more focus on inflation.
Mobs stoned trains and jammed roads with burning tyres in the eastern Bihar state, trying to enforce a day-long shutdown. Shops, offices and schools remained closed yesterday, when official data showed that food prices in Asia's third-largest economy rose an annual 17.4 per cent in mid-January.
At least 12 passengers were injured when angry crowds stoned a train in Hajipur town, while thousands marched in the street in different parts of the state asking shops to close.
"Their anger is natural," said Lalu Prasad, head of the Rashtriya Janata Dal party, referring to rising food prices.
Food prices have soared because last year's monsoon rains, which irrigate 60pc of Indian farms, were the worst in 37 years. Higher prices paid by government agencies to buy grains from farmers also helped push the inflation rate to 7.31pc in December, the highest in a year.
Inflation and a high fiscal deficit are major risks to India's plan to return economic growth back to the 9pc a year level seen between in previous years. A focus on inflation may also distract the ruling Congress party from pushing reforms such as the liberalisation of the agriculture.
These reforms may help cut the fiscal deficit, which is projected to rise to 6.8 pc of GDP in 2009/10.
Food prices have been key to political survival in the past. Onion prices helped push out a state government in 1980. Now, the volatile issue has given opposition parties a handle to attack the government, giving the Hindu nationalist Bharatiya Janata party a credible issue against the ruling party.
With public anger focused on high food prices, opposition parties may disrupt Parliament proceedings, further delaying debate on bills such as those on land acquisition and entry of private players into the pension sector.
Ahead of a January 29 policy review, Indian authorities seem more focused on tightening monetary policy to rein in inflation, even at the risk of hurting an incipient recovery.