Pro-active government role in combating inflation
Tuesday, 26 June 2007
Ahmed Showkat Masud
The price situation concerning price of essential consumer items is now the much-talked about issue at both government level as well as among the common people. Rate of inflation is rising. The price-hike of essential consumer items in the international market is creating inflationary pressure in our domestic market.
This is the logic noted by some functionaries of the government. But the government has to keep it mind that the markets for edible oil, sugar, powder milk, spices, etc., consumer items had been under the control of some big business houses of our country. They may be now inactive or less active.
The anti-hoarding drive, crack-down on corrupt business houses etc., have created an uncertain business environment for those big business houses who had been controlling the country's import trade in relation to main consumer items.
They will be remaining cautious as long as the current situation persists. This group of big business houses could raise the prices of market to any level as they thought the same profitable for them, irrespective of the sufferings inflicted on the common people.
By this way, they were able to make their fortune.
Since the 'politicians' of the immediate past elected government and some corrupt government officials were involved directly or indirectly with the business activities of those big business houses, the letter could control the market by manipulating the supply of the essentials imported at under- invoiced prices. The country had lost a huge amount of revenue.
Those business houses could control the some import sectors of the economy and gained money by paying less duty. But their average profit was huge in volume. In the process, the small entrepreneurs were the sufferers.
As those small entrepreneurs are controlling a small portion of the country's market, the prevailing situation will take some time to come to a normal condition.
As the big business houses have liabilities with various financial institutions, they will be active in the market within a short time in their own interest.
How much they could gain for themselves will depend upon different policy measures of the present government.
Such policy measures taken so far by the present government will have a positive effect on distribution of wealth if all those are skilfully implemented.
For the present situation of high inflation, some relevant factors may be noted here.
One is the increase in disposable income for essential goods. Another relates to the shift in the composition of demand.
Though both are inter-related each having effect on high inflation rate, corruption has, no doubt, been reduced. But, the practice is still prevailing in different sectors in a disguised and secret manner.
The black money is not deposited to the bank accounts or not used for ostentatious living.
A substantiated amount of black money that remains in cash form is available in the market. It is also creating demand for essential items.
Reducing demand for luxury items or assets is a cause of shift of demand composition towards essential consumer items. There may be pressures on prices for this reason.
In this situation, increase in investment among small entrepreneurs by providing them credit facilities under easy conditions and widening of credit facilities among producers of essential consumer items can increase supply in the economy that could help a great deal in removing dependence on few big business houses and can create employment in the economy. Unemployment created by the abolition of foot-path markets throughout the country has to be addressed by encouraging investment through self-employment programmes.
In our country, access to the credit facility for the poor people is limited. The non-government organisations (NGOs) are more active in the field. Since, the capacity of our economy is limited, the supply of consumer goods, mostly essentials, cannot be increased overnight to match the demand.
Therefore, the government has to play its pro-active role right now, in a clear perspective to overcome the situation.
The writer works with ONE Bank Limited, Khatunganj Branch, Chittagong. The views expressed here are his own
The price situation concerning price of essential consumer items is now the much-talked about issue at both government level as well as among the common people. Rate of inflation is rising. The price-hike of essential consumer items in the international market is creating inflationary pressure in our domestic market.
This is the logic noted by some functionaries of the government. But the government has to keep it mind that the markets for edible oil, sugar, powder milk, spices, etc., consumer items had been under the control of some big business houses of our country. They may be now inactive or less active.
The anti-hoarding drive, crack-down on corrupt business houses etc., have created an uncertain business environment for those big business houses who had been controlling the country's import trade in relation to main consumer items.
They will be remaining cautious as long as the current situation persists. This group of big business houses could raise the prices of market to any level as they thought the same profitable for them, irrespective of the sufferings inflicted on the common people.
By this way, they were able to make their fortune.
Since the 'politicians' of the immediate past elected government and some corrupt government officials were involved directly or indirectly with the business activities of those big business houses, the letter could control the market by manipulating the supply of the essentials imported at under- invoiced prices. The country had lost a huge amount of revenue.
Those business houses could control the some import sectors of the economy and gained money by paying less duty. But their average profit was huge in volume. In the process, the small entrepreneurs were the sufferers.
As those small entrepreneurs are controlling a small portion of the country's market, the prevailing situation will take some time to come to a normal condition.
As the big business houses have liabilities with various financial institutions, they will be active in the market within a short time in their own interest.
How much they could gain for themselves will depend upon different policy measures of the present government.
Such policy measures taken so far by the present government will have a positive effect on distribution of wealth if all those are skilfully implemented.
For the present situation of high inflation, some relevant factors may be noted here.
One is the increase in disposable income for essential goods. Another relates to the shift in the composition of demand.
Though both are inter-related each having effect on high inflation rate, corruption has, no doubt, been reduced. But, the practice is still prevailing in different sectors in a disguised and secret manner.
The black money is not deposited to the bank accounts or not used for ostentatious living.
A substantiated amount of black money that remains in cash form is available in the market. It is also creating demand for essential items.
Reducing demand for luxury items or assets is a cause of shift of demand composition towards essential consumer items. There may be pressures on prices for this reason.
In this situation, increase in investment among small entrepreneurs by providing them credit facilities under easy conditions and widening of credit facilities among producers of essential consumer items can increase supply in the economy that could help a great deal in removing dependence on few big business houses and can create employment in the economy. Unemployment created by the abolition of foot-path markets throughout the country has to be addressed by encouraging investment through self-employment programmes.
In our country, access to the credit facility for the poor people is limited. The non-government organisations (NGOs) are more active in the field. Since, the capacity of our economy is limited, the supply of consumer goods, mostly essentials, cannot be increased overnight to match the demand.
Therefore, the government has to play its pro-active role right now, in a clear perspective to overcome the situation.
The writer works with ONE Bank Limited, Khatunganj Branch, Chittagong. The views expressed here are his own