Domestic inflation defies global price index

That the country's food inflation in the past month was the highest - in fact at its record high of 12.56 per cent---in 11 years and nine months could be confounding to both laymen and financial experts but for the dubious business mechanism prevailing here. Last month, globally the FAO (Food and Agricultural Organisation) Food Price Index was estimated at an average of 120.6 points compared with 121.3 points of  September. More significantly, when the index has consistently been declining from its peak of 159.7 points in March 2022, the one of Bangladesh has gone exactly to the opposite direction. Food inflation is, however, not the only economic adversity confronting the nation, particularly the low- and middle-income segments of society, the overall high commodity inflation is giving them a nightmarish time. The overall inflation rose to 9.93 per cent in October from 9.63 in September. Strangely, inflation in rural areas last month almost hit the double digit at 9.99 as against 9.72 in urban locations.

What is the explanation then of the Bangladesh market's inflation trend contrary to that of the international market? The fact is that economic slowdown even in the most consumerist societies has curbed demand leading to a drop in prices. But people are forced to rein in their consumerism by slashing first the luxurious and less essential commodities from the family budget. When it comes to basic food items, those are not dispensed with or even cut in quotas unless in desperation. The other conditions remaining more or less same, Bangladesh market ought to have followed the global trend. But it has not. There is no proof that the people here have not curtailed their demand for luxury items, particularly the imported ones, and are ready to pay extra bucks to maintain the living standard they were used to.

The domestic trade regime here is unregulated and corrupt to the extent that traders can hold the entire nation hostage. Taking advantage of the government's laxity they have only flexed their muscle until they can even arm-twist the authorities. Free market economy does not give traders the licence to resort to malpractice and create market volatility for lining pockets. The glaring examples of manipulation of market to atrociously raise prices of egg, broiler chicken, onion, spices, cooking oil, sugar and lately potato and once again egg and onion indicate how business circle can contravene trade and commercial rules and consumer rights with impunity.

This is what exactly explains the inflation close to the double digit. It would have been much lower ever since the energy prices started falling in international market. In this country, there is no limit to profit making and resorting to dishonest means to achieving that objective. True, supply disruption of energy, raw materials and capital machinery following the Ukraine war was initially responsible for rising cost of production. But when energy price fell and international supply chain restored to a great extent, the positive impact was not at all reflected on the prices of commodities in the domestic market. Had the country's industrial products and agricultural produce followed the global price trend, inflation would be much lower. That the price of coarse flour has declined by 23 per cent is a proof of how the market could get tempered. Remarkably, wheat is mostly imported. Last but not least, if an egg is currently priced at Rs5.52 in India, why should it cost Tk 12-14 in Bangladesh? There is also a need to look into the production system here.