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By Latha SinghIt has been a rough few days for the Indian economy.
The government’s announcement that it will slash subsidies and excise duties on basic foods is having a chilling effect on the Indian consumer.
The rupee, on which India is dependent for a large part of its budget and imports nearly half of its food, is also falling.
But while some sectors have been hurting, the government is looking at the entire economy as it attempts to revive growth, a major priority in a country that has struggled to return to normalcy.
The government said it was cutting subsidies to food companies that had been paying farmers below the cost of production, including some large companies like General Mills and Anil Ambani’s Reliance Industries.
The announcement was meant to reduce the subsidy gap that has fuelled rampant inflation.
“It is a measure that we have taken with a view to ensure that the price of food is not going to go down significantly, which is something we have done in the past,” Minister of State for Food Processing and Consumer Services Jairam Ramesh said.
Ramesh did not offer specifics about how the subsidy reduction would be implemented.
It will likely be phased in over the next few months.
The cuts were a significant blow to the agricultural sector, which has been hurt by low prices.
Farmers, who had relied on subsidies to keep up with demand for their staple foods, are now struggling to get their products on the market.
The situation is dire, said Ramesham.
The Reserve Bank of India said on Thursday that India would likely fall back into recession.
“We expect the Indian manufacturing sector to suffer from the disruption of the subsidy cuts.
However, it is difficult to predict the impact of the changes on consumer spending, which will likely take some time to take effect,” said a report by the central bank’s monetary policy committee.
The fall in food prices is a major factor in the government’s efforts to revive the economy.
It wants to make it easier for small businesses to expand and make it more attractive for tourists and other foreign visitors.
The move comes amid rising concerns about India’s growing dependency on imports of food staples.
The country is now the fourth largest importer of grains and meat in the world after China, the United States and Brazil.
The country imports about 15 percent of its staple food products.
It has also seen the rise of a new middle class, whose disposable incomes are rising rapidly.
This, in turn, has pushed up inflation and driven up prices for many Indian consumers.
“The cut in subsidies is a step towards addressing the situation in the retail sector and will help the food and other retail sectors,” said Manish Shukla, head of food and beverage at the food service group Infosys.
“I expect it to be a positive step.”
However, the cuts will not have a huge impact on the food sector, he said.
The cut will have a major impact on small businesses.
The cut will affect all food businesses.
That includes small retailers, which are mostly in the agriculture sector.
The cuts will affect smaller businesses that do not make up much of the retail market.
“Small retailers are going to be hurt because they have no choice,” said Anjali Narayan, a research fellow at the Council of Economic Advisers.
“But it is likely to be small businesses that will see a big impact.”