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10 months ago

Chicken and egg: prime movers of inflation?

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Soaring inflation and its debilitating impact on all sections of citizens save the rich have been at the centre of discussion in the country for many months. Of late, the situation has deteriorated as food inflation has hit a record-high level in 12 years.

Until recently, the top government policymakers have been in a denial mood, as they have always found nothing wrong in the economy. The situation, however, has reached such a pass that they are finding it difficult to ignore the hard truth. While admitting that there is some degree of inflationary pressure on the economy, a section of people in the corridors of power is on the lookout for villains responsible for an abnormal rise in food inflation. If not others, the planning minister, M.A. Mannan, has found at least a couple of food items---chicken and egg---responsible for the rising inflation.

"Our inflation is not a runway one. It has not increased at a fast pace. Rather it has risen at a steady rate and will decline in the same way", the minister maintained while briefing the newsmen after the ECNEC meeting held on Tuesday last in Dhaka.

The policymakers, deliberately or otherwise, overlook the widely discussed issue of market manipulation by the so-called trade syndicates and official inaction to deal with them. They also sidetrack the issue of the negative impact of import squeeze because of the greenback shortage. The way things are moving in terms of the forex reserves situation, there should be genuine reasons to be worried.

One can discuss for hours the reasons, economic or otherwise, that are responsible for the current uncomfortable price situation. That is unlikely to help the consumers, particularly the poor and low-income ones.

Newspapers are full of reports highlighting the plight of these consumers because the price of almost every kitchen item has gone through the roof. Even middle-class consumers are now cutting their expenditures on food and other necessities. This development has again hit businesses hard because of a notable drop in their daily turnover. Overall, the economic activities have slowed down. Consumers will be happy if the assurance given by finance minister that the situation will be 'fine' soon takes hold. The way things have been moving, it is, however, hard to expect any improvement in the price situation anytime soon. The political uncertainty centring around the upcoming general election has made the issue far more complicated.

Undeniably, restrictions on import coupled with depreciation in the value of Taka against the greenback have pushed up the cost of all imported items, including consumables. A section of traders have been taking advantage of the situation, as they have formed so-called syndicates to increase the prices of many items, including locally grown food items, beyond reasonable levels. The government agencies concerned have utterly failed to deal with these unscrupulous traders.

The government has been making available essentials, such as rice, edible oil, lentils and sugar, at reduced costs to the poor and low-income people. However, the distribution remains limited and covers a tiny section of the needy population. The government's limitations concerning the distribution of food items are understandable. One particular move by traders at the kitchen market might partially ease the problems of the poorer section of consumers. If the traders sell goods in quantities that poor consumers can afford, the latter will consider it a notable relief. Say, if a consumer needs 100 grams of fish or any other kitchen items, traders concerned should not refuse to sell such a small amount. In neighbouring West Bengal, traders sell goods in small quantities. That practice has been in vogue for decades there. Even in Dhaka markets, during the 1970s and 1980s, fish traders used to cut fish such as Ruhi, Katla and Hilsa into pieces and sell the same in small quantities. They should revive that practice to make fish consumption affordable for poor and low-income people.

 

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