Instable kitchen market in unregulated economy

Now there is instability in the country's kitchen market. It continues to hit the common man again. Within a span of one week, prices of some essential commodities marked a sudden and unusual jump, belying all expectations about some stability returning to the market. Reports in the media suggest that prices of most vegetables registered an unusual hike in the past few days. The price of a medium sized cauliflower jumped to Tk 30 from Tk 15, cabbage to Tk 30 from Tk 15, tomato to Tk 50 from Tk 25 and per kilogramme (kg) beans to Tk 30 from Tk 20. So is the case with most of the leafy vegetables. Even the price of potatoes that remained at an unremunerative level for the growers for quite sometime, has now come under some pressure in the city's retail markets, shooting up from Taka 7.0 to Taka 12.0 per kg. This is just the closing part of the seasonal winter vegetables. Prices of many commodities usually remain less under pressure during this time, because of supplies in reasonably adequate quantities to the market. But the sudden jump in the prices of such commodities has left the commoners at bay. A Bangladesh Bank report, however, said that the prices of four essential commodities increased in February as compared to that of the previous month. The prices of soybean oil, powdered milk, sugar and mustard oil, as the report said, registered a hike last month. Although the government is trying hard to keep the inflation within a tolerable limit, the available indicators suggest that it is unlikely to achieve such an objective without multi-dimensional supportive measures. Food price-rise appears to be the main cause of the overall inflation in the country. And behind food inflation, price volatility in the international commodity market is one of the major reasons. In rural areas, rate of food inflation has crossed the 10 per cent level a couple of months back. A central bank analysis said external supply shocks were the key drivers of inflation. The rise in food prices on the international market has caused the local food prices to go up. But some local factors are also reportedly contributing to inflation. In fact, some contradictory official data -- those by the ministry of agriculture and also of the ministry of food & disaster management - about agricultural production kept the policy-makers earlier complacent over the supply of rice in the market. The ministry of agriculture estimated the total food grain (rice and wheat) output at 35.56 million tonnes in the last fiscal. But the food ministry put the figure at 33.16 million tonnes. Relying on the data of the ministry of agriculture, the government did not feel the urgency of importing rice from the international market. As a sequel to that, the supply-side constraint later became evident in the market, providing a mismatch with the demand. That pushed the prices of food grains up. Some sections of the business also took the opportunity to hike the price under the circumstances to make some windfall gains. On its part, the government has started and expanded the open market sale (OMS) programme in the country. The moderating effect of it on prices - taming food inflation - is yet not visible, at least to the extent it was desired. Food and Disaster Management Minister Abdur Razzak said there is no reason why the prices of all varieties of rice should rise at this time of full Boro season. He sought to put the blame on a few rice millers for such an unusual rice price-hike who, according to him, manipulate the prices through hoarding. Notwithstanding some pro-active government measures to rein in the rising rate of inflation, the market continues to behave in its own way, apparently not within some 'rational' perimeters. There is no strong sign of abatement of price pressures about essential commodities. Proper follow-up actions are still missing, particularly from the government side, about updates on the price charts and adulteration. Time and again, it has been pointed out by the media and the relevant quarters, that until the state plays an effective role in removing the distortions and imperfections in the market and enforces properly the consumer protection law - the law that provides for stringent punitive measures for collusion, market imperfections -- of a bizarre-type in the context of the specific situation in Bangladesh - the price pressure will continue to persist, causing immense sufferings to the people at large. In any unregulated economy, the existence of cartels is generally visible. This happens all over the world and Bangladesh is no exception. However, what is disheartening to note here is the erosion of morality and the associated greed factor. This has encouraged some traders to not only hoard their products but also to take recourse to adulteration as a technique for increasing profits. In a competitive market-oriented economy, the government does not otherwise do business and has no direct authority over the market. As such, the market is largely left in the hands of the businesses. But a good number of such businesses are not scrupulous and the "greed" factor is strong among them. It is this particular group of business people that remains active to take the advantage of 'laissez faire' economy and, thus, try to manipulate it for their benefit. Because of imperfections in the market and in the absence of free competition, such unscrupulous operators try to dominate the market. They remain active about creating a kind of monopoly, holding the general consumers hostage. The country needs at this stage an effective regulatory framework, coupled with a proper enforcement mechanism, for facilitating a rule-based market system to operate. In a situation where 'contrived' scarcity is created by some unscrupulous traders, the government should have the proper means to intervene and uphold the interest of the consumers. A strong market monitoring system in the context of Bangladesh should, therefore, be put in place, considering the fact that prices here rise not only because of mismatch between demand and supply but also from unethical profiteering instincts of a section of traders. Regulatory measures that should include, among others, introduction of a consumer-friendly legislation and competition law, need to be streamlined with a view to addressing the problems of market imperfections. Furthermore, it is also important to revamp the monetary policy in keeping with the needs of the time for containing inflation and ensuring price stability, without causing problems that may adversely impact production-related activities in the real sectors of the economy. The fiscal policy has also needs to be in line with such needs, in tandem with the monetary policy. (szkhan@dhaka.net)