Wednesday, 6 July, 2022

Tame inflation, boost consumption

The country is now in the grip of high inflation. The price hike of consumer items, resulting from the rising inflation rate, is now a major concern for the country. People of the fixed income group bear the brunt of this and find it difficult to make two ends meet. What is certain, however, is that the burden on the common man is going to increase in the days to come. The national inflation rate in March 2022 was 6.22 per cent, according to a BBS statistics. But, the figure is much higher than the BBS statistics, claim independent researchers. The war in Ukraine and subsequent economic sanctions against Russia have caused a rise in global prices of oil, commodities, fertilisers  and food grains resulting in disruption in the supply chains. A World Bank report has revealed that food prices are projected to increase by 22.9 per cent this year, the highest rise since 2008, as wheat prices jump 40 per cent due to the war.

The non-competitive market structure known as the 'business syndicate' comprising numerous middle-men, wholesalers and importers is another major factor in contributing to price hikes in the country. They do so by creating cartels and hoarding essential food items like rice and edible oil. Such cartels are capable of controlling supply in the market or fixing prices. They take advantage of the weak consumer protection laws in the country. The government needs to demonstrate that it is committed to a fully functioning competitive market economy by breaking up the 'business syndicate' and enacting and enforcing laws to safeguard consumer interests.

According to the ADB, 20.5 per cent of population in the country live below the national poverty line as estimated in 2019. This figure is now believed to be standing much higher due to the impact of the pandemic. As per a survey published at the end of the last year, it was estimated that the pandemic had pushed 32 million into poverty in the country. The government must tame inflation and boost consumption by providing direct benefits to the vulnerable sections. The government should also widen the social safety net in the upcoming budget aiming to safeguard the poor from inflationary pressure.