The Financial Express
Swasti Lankabangla Swasti Lankabangla

Injection into the black economy

Injection into the black economy

Economists are happy with the massive dose that the Eid celebration provides into the economy even though its black nature. Estimates differ but somewhere between Tk 290 billion -- Tk 500 billion (Tk 29,000 and Tk 50,000 crore) worth of economic activity is generated by the Eid Ul Azha celebration from sales of cattle to the obvious spin-off vocations of butchery, transportation, cattle feed and all the paraphernalia involved. All transactions barring the post Eid skin trading is in hard cash and from the change of money by hand it goes mostly to the unbanked rural economy and trickles down thereafter.

There will be the usual stories of unsold cattle whereby offers don't cover the cost of rearing the cattle and the heartbreaking scenes of cattle being driven back to the villages till the demand for meat rises well after Eid is over. But this year there is the added woe of ridiculously underpriced skin trade causing many to bury the skin rather than part with them at extreme low prices. There are rumours of a syndicate at work and it caused the government to lift the ban on exports during the prolonged Eid holidays. This follows reports of skin trading taking place well below the government-fixed prices that was declared without any effective monitoring.

The event evidently took the government by surprise but the lifting of the export ban doesn't help the smaller traders and benefits the larger enterprises that will still buy the skins at extremely low prices and make a killing by becoming involved with the international trade. This comes after the normal trade in skins from animal slaughter that takes place around the year. And it happens with a ban on cattle import for Eid this year.

Cattle rearing was on the decline mainly due to the unregulated imports from India but since the Narendra Modi government's clampdown on cross-border cattle trading and the official government ban, more cattle farmers were encouraged to rear their own stock in the hope of better returns. The seasonal floods put a damper on this initiative due to loss of cattle but there was no shortage per se. Therefore there seems little reason for a reduction in demand for skin thereby incredibly low prices for skins. It supports the theory of the syndicates trying to make a fast buck by offering unusual prices for skins and leaving the smaller traders tearing their hair in exasperation. Trading is best left to the trade but when evil designs rather than market forces force the issue, government intervention is a requirement. A central procurement system in line with grain purchase could be one answer and export through the Trading Corporation of Bangladesh could be another. After all, the TCB has just been allowed to import more than just essential commodities to break another syndicate, that of extremely high priced imported goods such as those from India that sell at nearly four times their tax-paid value. The move, if implemented in rural areas won't stop black money circulating but will ensure the injection of a sizeable chunk of change into the rural economy where it is needed most.


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