A reminder: Year-round market monitoring is the key to beating inflation

A large portion of ordinary people who spend the majority of their monthly income on food and accommodation have been feeling the heat of commodity price hikes during the past couple of months. 

While struggling to adapt to pandemic-induced economic losses, they are looking for cheap alternatives. Pictures of huge crowds in long queues gathering before the Trading Corporation of Bangladesh (TCB) trucks are disturbing proof of the real situation.

State-operated Bangladesh Bureau of Statistics (BBS) December 2021 bulletin on the increasing inflation rate was just a formality. Concerned individuals, including economists, have feared the occurrence of such a situation for a while now. 

When the government increased the prices of diesel and kerosene–two essential commodities for the transport and agriculture sectors–at the beginning of November, concerns about possible inflation were raised. The prices of most of the commodities in the international markets have shot up because of demand recovery, compounding the inflation-related crisis. 

The government, presumably, was aware of the situation. Now the question is why the government has failed to contain growing inflation. 

The commerce, as well as the food minister, would blame the rocketing international market prices. But some independent economists say that the persisting weakness in market monitoring across the local markets, particularly of essential food items, is responsible for the post-pandemic inflation in Bangladesh. The obvious victims of such negligence are the people of low-income and limited-earning brackets.  

The latest inflation rate estimated by BBS indicates that the growing trend of inflation has forced rural people to spend more to buy goods. The average inflation in rural areas rose to 6.20 percent and 5.59 percent in urban areas in November. In the previous month, the inflation rates in the rural and urban areas were 5.81 percent and 5.50 percent respectively. 

Nationally, the average inflation rate rose to 5.98 percent in November from 5.70 percent in October, defying the government target to keep inflation at 5.30 percent during the 2021-22 fiscal year. Besides, food inflation rose to 5.9 percent from 5.62 percent in October. Non-food inflation rose to 6.17 percent from 6.78 per cent, according to BBS.

Economists say the rise in diesel and kerosene prices have had a strong impact on the commodity markets. Due to the fuel price hike, fares on almost all modes of transportation have gone up. 

And the money of consumers, particularly those with fixed income, have lost buying power in real terms.

"That time, we requested the government not to increase the prices of diesel and kerosene. The price hike was not a necessity. Just within a month, that particular move influenced the overall inflation," said Professor Selim Raihan, the Executive Director at South Asian Network on Economic Modeling (Sanem). 

The economics professor from the University of Dhaka added that amid the soaring international market prices, the pressure of inflation at present would not have been so high if the fuel prices were not increased in November. 

Since August, the price of the main staple, rice, has been rising amid good Boro harvest. The other food items, including edible oil, pulse, sugar, eggs and vegetables are being sold at higher prices. 

In such a situation, the expanded coverage of public food distribution (PFD) through the TCB, via subsidies, would have cooled the heat from the commodity price hike. According to the Ministry of Food, 17.75 lakh tonnes of food grain: 13.40 lakh tonnes of rice, 3.25 lakh tonnes of wheat and 0.15 lakh tonnes of paddy, were stocked in the government's storage. If the stocks were enough, open market sales of rice at a subsidised price would have been a remedy. 

If the stocks were not enough, the government should have set a realistic target for rice imports. But nothing has happened due to data deficiency. 

Independent economists have long been suggesting that the government sharpen its market surveillance so that product pricing from the production to retail level can be regulated properly. "But there is no orchestrated and modern system to monitor the commodity market. Ministers often express their disappointment as data deficiency hampers the calculation of actual production, particularly from the agricultural sector, and projection for imports. Hence, we see a blurred picture of supply and demand," Professor Raihan explained.       

Market monitoring is not a short-term or occasional matter. The economist lamented, "We speak loudly about market monitoring only when we are in the middle of such situations. The standard way is to monitor the markets strictly all year round," Raihan added.

Now, how can the government try to beat inflation in the post-pandemic period when mere food inflation could ignite political unrest? The readjustment of fuel prices could be a remedy. But it is now solely dependent on the international market. The government can also strengthen the PFD system. Sector-wise rationing–a kind of PFD–in such a crisis could be effective. 

Raihan further explained, "The arrangement of food rations for low-earners in the RMG and other sectors is possible. But the government should keep sharper surveillance over the PFD. Because the previous experiences suggest that unscrupulous PFD handlers sell the subsidised food in the open market illegally. This should not be allowed to happen."       

Sadiqur Rahman. Illustration: TBS