Soaring living cost hurting the poor hard: economists

A gate of a building is covered with house rent advertisements at Farmgate area in Dhaka. — Ali Hossain Mintu

The costs of living in Dhaka increased by 6 per cent in 2018 for price hike of food items and other daily essentials, which hit the lower income group hard amid growing income inequality, economists have said.
Consumers Association of Bangladesh on Sunday said in its annual report that the cost of living in Dhaka in 2018 rose by 6 per cent while the prices of products and services grew by 5.99 per cent in the year.
The cost of living in 2017 had risen by 8.88 per cent while the overall inflation had been 7.17 per cent, data show.
The association prepared the report based on data it collected from 15 retail markets in the capital and various service providing agencies on 114 food items, 22 other essentials and 14 utility services.
The report shows that rice prices increased by 8.91per cent on average and vegetables prices by 9.38 per cent in 2018.
It shows that the increase in prices of soaps was the highest in 2018 by 20 per cent while prices of sari increased by 6.59 per cent, clothes by 10.64 per cent and coconut oil by 7.86 per cent.
In 2018, prices of fish increased by 13.50 per cent, liquid milk by 10.33 per cent, spices by 8 per cent and eggs by 7.71 per cent on average.
According to the report, rent of house (with two rooms) increased by 5.5 per cent.
‘Increase in living cost by 6 per cent will cut the real income of lower income group as the distribution of the growth of per capita income is not equal for all,’ economist Anu Muhammad has told New Age.
He says that the growth of per capita income was higher than the living cost but the income growth rate of lower income group was very slow.
Although per capita income increased significantly, the Household Income and Expenditure Survey-2016 showed that the income gap between the rich and the poor widened in 2010-2016.
According to the report, Gini co-efficient, which is used to measure income inequality, increased to 0.483 at national level in 2016 from 0.458 in 2010 meaning that the rich became richer while the poor poorer during the period.
The top 10 per cent households of the country held 38.16 per cent of national income in 2016, up from 35.84 per cent in 2010, the report showed.
On the other hand, only 1.01 per cent of the income went to the bottom 10 per cent of households in 2016 against 2 per cent in 2010.
Increase in prices of daily essentials and services widened the inequality of rich and poor and had a negative impact on living standard as ultra-poor, middle income and lower middle income people were the large majority in the country, CAB president Ghulam Rahman said while presenting the report at a press conference at Dhaka Reporters Unity.
He suggested that the government take initiative to keep the prices and supply of essential commodities steady.
The CAB report showed that gas and electricity tariffs and transport fare did not rise in 2018.
According to the report, despite the increasing prices of rice farmers were not getting benefits from it, rather rice mill owners and middlemen were making profits.
To ensure food security, the government should announce the target of collection and prices of rice before starting the harvesting season of paddy, CAB suggested.
It also suggested that the government collect rice directly from farmers through ‘contract growing’ system to ensure the benefits of the government-set prices for the growers.
It said that consumers were forced to bear the high price of electricity as the government did not adjust the fuel prices in line with international market.
Improvement of public transport in 2018 was not remarkable, health sector expanded in the year but the quality of service was questionable, the report noted.
The government did not increase the fare of public transport but in many cases bus owners continued to charge extra as their will, it found.
CAB proposed to form an independent commission like Bangladesh Energy Regulatory Commission, which would set the fare of bus and truck in a transparent manner.
It also proposed to engage the commission to set the fare of water transports and price of drinking water.
The association recommended upgrading primary education up to Class VIII and to introduce combined admission test system for higher government educational institutes.
It urged the government to enact education law to ensure quality education in the country.
According to the report, the fees of physicians and cost of health check-up was unregulated while the prices of medicines remained out of buying capacity of the poor.
It said that depositors and small borrowers in banks were facing trouble because of rising defaulted loans and corruption in banking sector.
‘Although Bangladesh has been going by the principle of free market economy for the past couple of decades, the country imposed high duty on imports in the name of protecting local industry and thus forced our consumers to pay more,’ Ghulam Rahman said.
Citing a recent Policy Research Institute of Bangladesh study, he said that due to the high import duty, the additional expenditure of Bangladeshi consumers was $14.22 billion in 2017-18 financial year.
It observed that drastic cut in import duty would be logical for ensuring industrialisation, employment and fair prices of products.
The association proposed formation of a consumer affairs ministry to keep the supply and prices of essentials stable.
It also recommended that the government should repeal Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act 2010 to ensure transparency, accountability and competition in the sector.
CAB said it was possible to ensure uninterrupted electricity to the consumers at low prices through implementing the project of mega power plants and importing from Nepal, Bhutan and India.
The association called upon the government not to extend the tenure of quick rental power plant any more.
‘Despite having scope of producing electricity at lower prices, the government is producing it at high prices,’ CAB observed.
It urged the government to ensure equal distribution of resources and take initiative to create massive employment.
Although the per capita income was growing at a rate of 12-13 per cent, the increase in living cost by 6 per cent would hit the lower income group hard as the income of the group was not increasing at the same rate, Centre for Policy Dialogue research director Khondoker Golam Moazzem said.
Citing the statistics of CAB, he said the cost of living in Dhaka was higher than the average inflation, which proved that there were scarcity of quality products and services in the city.
‘We are not getting the services in accordance with our expansion. Living standard in Dhaka is lagging behind even many under-developed countries,’ Moazzem observed.
The CAB report said that economy should be driven by consumers but the group remained during making any decision at policy level.
Energy adviser to CAB Md Shamsul Alam said that the cost of living should not have increased in 2018 as gas and electricity tariffs and transport fare did not increase in the year but it happened because of price hike of essentials.
CAB demanded proper enforcement of Consumers’ Rights Protection Act-2009, Competition Act 2012, Safe Food Act 2013, and Formalin Control Act 2015 to ensure fair prices and consumer rights.

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