The economy last year saw an overall inflation rise to 4.96 percent. This is according to the consumer price index (CPI) published by the National Statistical Bureau (NSB).
The nation’s lowest inflation rate was of 3.22 percent in 2016.
Inflation rate, however, does not translate into immediate and absolute increase or decrease in price. It is the rate at which prices of goods and services increase or decrease.
From 8.8 percent in 2011, inflation hit an all-time high of 11 percent in 2012. After a persistent figure of about 8 percent for the two successive years because of the loan restrictions and rupee shortage, it came down to 4.58 percent in 2015 on the back of a fall in global fuel prices.
The lowest figure in 2016 is attributed to stabilisation of prices, which means the there weren’t significant price fluctuations of the basket commodities.
The National Statistical Bureau (NSB) attaches more weights to food commodities, transport, including fuel prices, housing, and electricity. Weights reflect the relative importance or contribution to the total consumption expenditure of all the households. It is determined using the spending patterns of households. The more current the weights, the more reflective they are of current consumer spending patterns.
The current CPI weights were updated in 2012 following the Bhutan Living Standard Survey (BLSS).
The year-on-year CPI for December last year increased by 3.30 percent. This means that between December 2016 and December last year, the prices of food and non-food items went up by 6.97 percent and 0.93 percent respectively.
The prices of domestic goods and services increased by 2.72 percent, while the prices of imported commodities went up by 3.84 percent.
Year-on-year inflation in December was the lowest last year. Monthly CPI figures show that year-on-year inflation figures started declining from almost six percent during the year. Since September, year-on-year inflation (price change between September 2016 and September 2017) declined to 4.91 percent. There has been a declining trend since then.
A local economist said that this could be the impact of Indian goods and services tax (GST). The GST exempts levies on all good exported out of India and this will have a major impact on imported goods and services.
The purchasing power of Ngultrum (PPN), as measured by CPI, was Nu 75 as of December 2017. This means Nu 100 in December 2017 was worth only Ngultrum 75 at December 2012 prices. The PPN has decreased by 3.20.
This is the effect of the inflation in the economy.