Higher non-food inflation has potential for unrest: MCCI

FE Team | Published: November 17, 2011 00:00:00 | Updated: February 01, 2018 00:00:00

FE Report Metropolitan Chamber of Commerce and Industry (MCCI), voicing its concern over the rising inflation of non-food items, has warned that it can trigger social unrest and political instability. Between June and September this year, the point to point non-food inflation rose by 3.04 percentage points, while the point to point inflation rose from 10.17 per cent in June, 2011 to 11.97 per cent in September. "An added concern is that the non-food inflation has been going up," the MCCI said while releasing its quarterly economic review Wednesday. "The non-food inflation is badly affecting the living conditions of the ultra-poor, the poor, not-so-poor, and even the middle income group of people," it added. The chamber in its July-September review said the government should assign top priority to bring inflation under control before it becomes "self-propelling and turns increasingly difficult to contain." Agriculture The agriculture sector, which contributes about 20.3 per cent to the country's GDP and employs around 43.6 per cent of the total labor force, registered 5.0 per cent growth in FY11. Foodgrain situation The overall foodgrain production in FY11 is estimated at 34.4 mmt which is 3.77 per cent higher than the actual production of 33.15 mmt during the previous year. The production target for the current fiscal year is only marginally higher than the previous year's actual production, according to the MCCI review. Referring to the foodgrain import, the review said in FY12, the government has a target to import 1.7 mmt of foodgrain, of which 0.8 mmt is of rice and 0.9 mmt is of wheat. As of 21 September of this marketing year, Bangladesh imported 289.5 thousand mt (tmt) of rice, all through government. At the same time last year, 267.3 tmt of rice was imported. Regarding wheat, Bangladesh till 21 September 2011 imported 207.7 tmt, of which 50 per cent was through government channels. At the same time last year, 697.7 tmt of wheat was imported. In the current fiscal (FY12), government has set a target of buying 1.10 mmt of foodgrain from the domestic market. As of September 22, 2011, 640.4 tmt has been procured and 739 tmt contracted (139 tmt above the target). In FY11, total domestic public foodgrain procurement target was initially set at 1.65 mmt but the target was later revised downward to 1.04 mmt. In terms of distribution, the government planned to give out a total of 2.91 mmt foodgrain to poor households in the current fiscal as against 2.77 mmt in FY1 1. Over the fortnight ending 22 September 2011, 40.8 tmt were distributed, mainly through OMS, FPC and VGD. According to the Directorate General of Food, as of 22 September 2011, the public foodgrain stock stood at 1.40 mmt comprising rice 1.14 mmt and wheat 0.26 mmt. By comparison, the opening public stock of foodgrain for FY11 (as on 1 July, 2010) was as low as 0.52 mmt (0.41 mmt was rice and 0.11 mmt wheat), which was about half of the opening stock of FY10 (1.05 mmt). The reason for this exceptionally low opening stock was a low level of domestic procurement for both aman and boro rice. The MCCI review said domestic market prices of rice and wheat registered a mild increase during Q1 of FY12. These prices are about 0.9 per cent higher than a year ago. Over the same period, the wholesale price of atta in Dhaka city markets stalled at Tk.25.70 per Kg while its retail price continued to rise, by 3.8 per cent, up to Tk.27.50 per Kg. The retail price of atta is now lower than a year ago, the recent increase in the price notwithstanding. Industry The industry sector grew by 8.2 per cent in FY11, compared to 6.5 per cent in FY10, and its share in the country's GDP increased by 0.4 per centage point to 30.3 per cent in FY1 1 from 29.9 per cent in FY10. There is, however, no official data on the performance of the sector in the quarter under review. Manufacturing industries The 9.5 per cent growth in manufacturing industries (including large, medium and small category) in FY11, compared to 6.5 per cent in FY10, was encouraging indeed, but it is not clear if the same growth rate was maintained in the first quarter of the current fiscal. On the other hand, poor infrastructure, the absence of new industrial investment, the high cost of bank credit, and the scarcity of power and gas are cited to have been the major constraints faced by industrial entrepreneurs, because of which many enterprises have reportedly been forced to shut their operation. Construction The construction sector expanded by 6.4 per cent during FY11, facilitated by the high growth in the production of cement and the import of construction materials. The construction in the housing sector, however, continues to be at a disadvantage because of the shortage of power and gas. In fact, the sale of land and apartments has dropped significantly due to the lack of new electricity and gas connections to residential and commercial projects and the increase in land transfer costs. Services sector The growth rate of the services sector rose mildly to 6.6 per cent in FY11 from 6.5 per cent in FY10. Much faster growth can be expected in the present fiscal if production in real sectors increases at a greater pace. The trade sector is also getting a boost because of more bank advances going to various trading activities. Growth in private schools and universities has widened education services. New private television channels are fueling the growth of community, social, and personal services. The large numbers of health care service providers also contribute to the growth of the service sector. Continued to page 19