India’s decision this week to ban agricultural trade contracts marks the latest effort by Narendra Modi to ease public concerns about rising inflation ahead of key state elections early next year.

The country’s consumer price index, which tracks retail inflation, reached a bottom in September and rose to 4.9% in November. The wholesale price index, which reflects corporate prices, has soared to a record 14% and has remained at double-digit levels for most of the year.

As prices rise, authorities around the world worry that the economy will rebound due to the shock caused by the early pandemic, which will cause inflation to soar.

The government this week banned the trading of several agricultural futures contracts such as soybeans, wheat and palm oil for one year in response to concerns about rising food inflation.

Although retail food inflation has remained modest in recent months, domestic soybean prices-for example-have almost doubled this year. According to CNBC-TV18.

The ban was introduced before opinion polls in several agricultural states. Both Uttar Pradesh, India’s largest state controlled by the Bharatiya Janata Party, led by Prime Minister Narendra Modi, and the opposition-ruled Punjab State, will hold elections in the first few months of 2022.

Some agricultural groups have called for a ban, believing that speculative trading in the futures market has exacerbated inflation. Although there is a lack of evidence that futures trading can help control inflation, Indian authorities have taken similar measures in the past to ban futures trading.

“Derivatives are not behind the price increase,” said Kishore Narne, head of commodities at broker Motilal Oswal. “This is more for optics… the government wants to show people that it is working hard to control food inflation.”

Both Uttar Pradesh and Punjab strongly oppose Modi’s series of market-friendly agricultural reforms launched last year, which farmers believe will endanger their livelihoods.After a year of continuous protests, the government Repeal the law last month.

However, the Reserve Bank of India is still relatively accommodating to inflation, despite Other central banks.

The retail inflation rate of 4.9% is still within the target range of the Reserve Bank of India, and since March 2020, interest rates have remained at a historical low of 4%.

Shaktikanta Das, Governor of the Reserve Bank of India, emphasized the importance of supporting India’s economic recovery, especially considering the global spread of Omicron variants. India has reported about 200 confirmed cases of the novel coronavirus variant.

Das said this month that the Reserve Bank of India will maintain a “loose” stance, “as long as it is necessary to restore and maintain growth on a lasting basis, and continue to reduce the impact of Covid-19 on the economy”.

India’s economy grew by 8.4% year-on-year in the September quarter, although after a sharp contraction during last year’s strict lockdown, the economy’s rebound reflects little actual expansion. Consumer and business activities have increased dramatically.

Priyanka Kishore, head of the Oxford Institute for Economic Research in India, said: “The Reserve Bank of India is still very comfortable with its remarks that inflation is temporary and driven by one-off factors.” “Here. At one point, people would think that they are in the realm of fiscal rather than monetary policy.”