Food prices drive inflation amid Covid-19

MB Subba  

Prices of goods rose by 7.75 percent in October 2020 compared to the same month in the previous year, the National Statistics Bureau (NSB) reported in its latest CPI report released on December 31, 2021.

The main contributors to the inflation were the increases in the prices of food and non-alcoholic beverages.

Price of meat increased by around 30 percent, followed by vegetables over 20 percent and fruits and dairy products by around 15 percent, according to NSB. Prices of betel nuts and betel leaves also increased by 20 percent.

The month-on-month consumer price index (CPI) in October increased by 0.31 percent with food prices increasing by 0.41 percent and non-food by 0.23 percent. Price of alcoholic beverages decreased by 0.92 percent in October compared to that of September.

In the last quarter of 2020, the consumers reported high increases in prices of commodities, especially vegetables and meat items.

Month-on-month inflation trend during the last 12 months

Month-on-month inflation trend during the last 12 months

Price of local pork in the market were about Nu 750 per kg in the last quarter of the year, which is about  100 percent increase from the previous year. Similarly, the price of locally produced green chili shot up to Nu 500 per kg in December last year.

Vegetable vendors say the price hike was caused by the high prices charged by farmers at source. They also blame the high cost of transportation due to the Covid-19 situation forcing the price hike.

A vegetable vendor in Thimphu said vegetables and meat products were in short supply. But he said that the prices now were being monitored by officials and that the prices had slightly reduced even in villages from where the goods come from.

The Office of Consumer Protection (OCP) has asked shopkeepers and vendors not to manipulate the prices of goods during the lockdown. The OCP’s director, Sonam Tenzin, in a notification issued a few days ago stated that shopkeepers must mandatorily displace a price board.

However, transport and communication prices dropped in October by 0.21 percent and 0.19 percent respectively, according to the NSB.

With the increase in the prices, the purchasing power of the Ngultrum (PPN) as measured by CPI is Nu 67 as of October 2020 compared to December 2012. This means, Nu 100 in October 2020 is worth only Nu 67 at December 2012 prices.

The PPN has dropped by 7.19 percent in the past 12 months (from October 2019 to October 2020) due to price increase in the economy.

The CPI is a measure of average price changes in the basket of goods and services purchased by households over time. It shows how much, on average, prices of goods and services have increased or decreased from a particular reference period.

According to NSB, the CPI covers goods and services consumed by households and  samples of goods and services are selected using the household expenditure data to measure the inflation experienced by the households.

Prices of the sampled goods and services are collected from urban areas in 20 dzongkhags on monthly, quarterly and annual frequency depending on the price volatility of the items.

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