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Govt. hopes the inflation will slowdown after second round of vaccination

MB Subba

While prices of local farm produce have decreased significantly, the overall inflation rate remains high and unabated amid the Covid-19 pandemic.

In one of the highest increases, the prices of petrol and diesel have increased by about 53 percent the past one year. This implies that the fuel budget of a person who spent Nu 2,500 monthly a year ago has increased by about Nu 1,325 for the same quantity.

The prices per litre of petrol and diesel in Thimphu was Nu 77.2 and Nu 73.46 respectively as of yesterday. The prices of petrol and diesel in June last year were Nu 50 and 48 respectively.

Similarly, the price increases of food items have been sharp and continued to be the main driver of inflation of food items at 12.7 percent in the past year, according to data published by the National Statistics Bureau (NSB) on July 13.

The betel nut and betel leaves recorded the highest increase with 40.75 percent, followed by meat and cooking oils at 37.21 percent and 20.21 percent respectively. A carton of Dalda that cost Nu 900 last year increased by 100 percent this year.

The overall consumer price index (CPI) for the month of May 2021 increased by 8.69 percent from May 2020. 




This means that the prices of goods and services consumed by the households are 8.69 percent costlier in May this year compared to the same month last year.

Prices of non-food items went up by 5.40 percent in the past one year with garments and transport recording the highest increase of more than 8 percent. Increase in transport is mainly due to price of petrol and diesel.

Economic Affairs Minister Loknath Sharma said that the prices of fuel were beyond the government’s control as the prices are determined by the prices of crude India purchases and the market factors.

“We hope that the situation will improve once the country achieves herd immunity after the completion of the second round of vaccination. Some of the restrictions are expected to be relaxed to reduce the cost of transportation,” he said, adding that consumers should refrain from making unnecessary purchases.

Lyonpo said that the government was not been able to do much as the inflation came not only from the production level but also due to high transportation costs.

“The high loading and unloading charges at Mini Dry Port (MDP) in Phuentsholing and Sorchen makes the goods expensive besides other factors,” he said.

Inflation, he said, was prevalent in most countries and Bhutan’s inflation rate was about 3 percent higher than that of India. Lyonpo said that the capacity of the MDP was restricted and only a limited numbers of vehicles and workers are allowed inside due to Covid-19 protocols and that waiting charges had to be paid for vehicles.

The economic affairs minister said that the implementation of the recently passed Customs Duty Bill 2021 would reduce the prices of goods imported from third countries. The Bill reduces the duty to 10 percent from the existing rates of up to 50 percent on about 500 goods from third countries.

However, the prices of local farm produce have decreased. For instance, the prices of local chillies fell from up to Nu 600 per kilogramme last winter to Nu 30 per kilogramme recently in some dzongkhags.

Similarly, the prices of other vegetables like cabbage have also decreased.

Paro’s Dogar Gup, Lhab Tshering, said that farmers used to get Nu 500 for 30 kilogrammes of cabbage in the Phuentsholing auction yard before the pandemic. “Now farmers are selling 30 kilogrammes of cabbage for Nu 300, which comes to Nu 10 per kg only, to Food Corporation of Bhutan Limited (FCBL). They have to either sell at the low price or let them rote in the garden,” he said.

Lyonpo Loknath Sharma said that the low prices for local produce were because of the supply and demand factors. But he added that India’s recent decision to recognize the import of chilli, beans, cabbage, cauliflower, carrot, peas and soybean from Bhutan would benefit farmers in terms of getting better prices and access to market.

According to the NSB, drop in vegetable prices contributed to the decrease prices in the food group.

Inflation also erodes the purchasing power of money. The purchasing power of Ngultrum as measured by CPI is Nu 64 as of May 2021 compared to December 2012. This means, Nu 100 in May 2021 is worth only Nu 64 at December 2012 prices.




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