The official inflation rate is recorded at 4.94 percent as per the latest report this year. On the ground, many are feeling the heat this summer as prices of essentials have almost doubled in the last one year. The poor and the middle income group are affected the most.
Increased food prices mean the low-income group are cutting down on food items like meat and dairy products. Many families are also struggling to afford basic necessities.
One evidence of the rising cost of essentials is how Bhutanese are cutting down on offerings, a critical part of our life. Many say they have either reduced their butter lamp offerings or are contemplating reducing it because ‘dalda’ has become unaffordable. A box of the hydrogenated fat that cost about Nu 900 at the beginning of last year cost more than Nu 1,800 to Nu 2,000.
Egg price is the latest to hit the consumers. Although it is the only food item that we can proudly claim of being self sufficient, there is no control on the price of eggs because we still import layers, broilers and feed.
Inflation, if not controlled could push many Bhutanese, who lived above the poverty line below the poverty line. It is also a difficult time when most people have lost jobs because of the pandemic and are surviving on ‘kidu’.
Economists explain more flow of money in the economy and shortage of stocks cause inflation. In the present context, as an import driven economy, the problems associated with import of essentials is the probable cause of inflation.
The government claimed inflation in our market is because of inflation in India. That is one fact. There are areas where policy making can keep a tab on the rising cost, goods or services . Inflation, especially the increasing price of essentials, house rents, and fuel is impacting the people of lower-income group.
The government could intervene in areas like the ever increasing house rents. It cannot be left to the market forces alone. In times of the pandemic, house owners benefiting from the fiscal and monetary policies like the interest waiver, deferred payment of loans should have played a role in checking inflation by letting the benefits trickle down to the tenants. Most Thimphu residents spent about 60 percent of their income on house rent.
Cost of utilities are another burden on the already burden consumers. Unfortunately, price regulation is also poor in the market. Our market is flooded with goods that have no fixed prices.
Everyone understands that improving our own food production is the only way out to tackle increasing food prices. But we have also been discussing that for decades. The pandemic has only exposed our vulnerabilities. Although efforts are made, we are far from producing what we need.
Our high-cost economy is another challenge. Cost of production is always high. Reviving the economy will not be possible if policies are not framed and implemented to address the existing problems.