Inflation reaches 6.27

The drop is attributed to the falling fuel price

Economy: The price of goods and services increased by 6.27 percent last month as compared to March last year.

The increase was 0.05 percent lower than the annual inflation for February. The falling fuel price has caused inflation to decline since September last year. “Had it not been for the dropping fuel price, inflation would have crossed seven percent,” an official with the National Statistical Bureau (NSB) said.

However, prices of locally produced goods and services increased by 6.28 percent in the same period while imported goods increased by 6.35 percent. This means that domestic inflation contributed almost half of the overall inflation.

This, NSB official said was due to the rising house rent, which has increased by around 13 percent between March last year and March this year.

He said there are other factor like education, transportation and communication expenses besides locally produced food and vegetables contributing to the domestic inflation.

It was also revealed that an imposition of five percent communication tax since mid last year did not affect the inflation since the tariff pertaining to talk time was only taken into account.

From the imported goods and services, price of vehicle recorded 37 percent increase last month compared to March 2014. This was also attribute to the tax revision.

Food price has risen by 4.77 percent and non-food by 7.28 percent. Within the food group, milk, cheese and egg recorded an increase of 9.14 percent followed by meat prices, which increased by 8.14 percent.

Technically, NSB official  said that inflation rate is dependent on the base price. For instance, to determine the price change this month, a direct comparison would be made in relation to the price in April last year.

Inflation, officials said also depend on the elasticity of goods and services.  A good or service is considered to be highly elastic, if a slight change in price leads to a change in demand or supply.

For instance, inelastic goods like fuel are insensitive to price change. Even after imposing green tax or raising the price, for instance, its demand is not likely to fall unless an alternate source is identified. Which is why, fuel price has more impact on inflation than most of the commodities.

NSB tracked the price movements of 436 commodities and services in 20 districts and two major urban areas. For vehicle prices, officials said the vehicle dealers in the country provided the figures while house rent was compiled from figures from dzongkhags.

By Tshering Dorji

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