Domestic inflation overtakes imported

Food price increased by 3.19% between November 2014 and November 2015

NSB: The country’s inflation rate is always associated to the inflation in India because it portrayed a similar trend. Not any more.

The basis is that the country imported almost 90 percent of commodities from India, including the inflationary trends.

The National Statistical Bureau’s (NSB) consumer price index revealed that the price of goods and services between November 2014 and November last year increased by 3.59 percent.

But the prices of imported goods increased by 2.69 percent and imported goods increased by 4.60 percent. This means that more than 60 percent of the inflation is homegrown.

Even in October, the prices of domestic goods and services increased by 4.74 percent and imported goods increased by 2.51 percent

“Imported inflation has more weights,” a NSB official said. Weights reflect the relative importance to the total consumption expenditures of all households.

The more the spending or consumption of particular items in the economy, more the weight. For instance, must-needed commodities like fuel and rice are attached more weight because a slight fluctuation in price could influence inflation rate.

NSB uses the December 2012 price and tracks the price movements of 151 items (436 varieties) in 20 dzongkhags and two major urban areas every month. Every item is attached with weights.

The increase in price of domestic goods and services, CPI states, was because of the increase in food prices by 3.19 percent and non-food prices by 5.42 percent.

On the contrary, food prices for imported commodities increased by 2.26 percent and non-food prices by 3.04 percent.

Officials also said the decline in rate of imported inflation could be attributed to global price drop of crude oil. Fuel and lubricants recorded a price decrease of almost four percent between November 2014 and November last year.

Similarly, in the food basket price of fruits also went down by four percent in the same period.

At home, cost of catering service within a year increased by almost 10 percent, recording the highest rate.

Housing, electricity and water services also recorded an increase of 4.4 percent while education also became dearer by about 7 percent.

Meanwhile, elasticity of various goods and services also influence inflation.  A good or service is considered to be highly elastic, if a slight change in price changes the demand and supply.

For instance, inelastic goods like fuel, where there are no other substitutes, would influence inflation because demand is not likely to fall, irrespective of an increase or decrease in price.

Tshering Dorji

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply