Expensive talk

The Ministry of Agriculture says that the prices of local vegetables is increasing. They are right. In fact, the prices of local vegetables have not just increased; they have skyrocketed.

Between this time last year and now, according to the Ministry of Agriculture, the price for local cabbages increased from Nu 37.43 to Nu 48.75. That’s an increase of 30.25%. The price of local chillies increased from Nu 270 to Nu 300 or by 11.11%. And the prices of potatoes and beans have jumped by a massive 47.22% and  39.40% respectively.

So what’s driving the prices of local vegetables?  The Ministry of Agriculture has blamed inflation, the seasons and the rupee crisis.

Yes, inflation would have caused price increases. The last quarter recorded inflation at 13.53%. That’s the highest rate we’ve seen in years. But that’s nowhere near the 47% increase in the price of local potatoes. By comparison, the price of imported potatoes, which was Nu 17.83 per kg last year, increased only slightly, to Nu 20 per kg this year. We import most of what we consume from India. So inflation rates here follow those in India. And since the price of imported potatoes (and other vegetables) went up only marginally, inflation cannot be blamed for the huge increase in the cost of local potatoes (and local vegetables).

Nor can we blame the seasons. In their report, the government compared vegetables prices between two years but at the same season. So when they say that the price of local cabbages have increased from Nu 37.43 to Nu 48.75 per kg, they are talking about  prices in June last year, versus prices in June this year. More significantly, the government has found out that production of local vegetables have gone up. All this means that we can’t pin the blame on the season.

The third excuse that the Ministry of Agriculture has offered for increasing vegetable prices is the rupee crisis. I agree, the rupee crisis is to blame. But not for the reasons that the Ministry of Agriculture thinks; not because the ngultrum is fetching fewer Indian rupees at the informal exchange market.

The rupee crisis did indeed cause a sudden hike in vegetable prices. But they went up due to an unlikely event. On 12 April the prime minister went on national TV to talk about the rupee crisis. During that talk, the prime minister announced that the government would no longer permit vegetables to be imported from India. Prices of local vegetables went up immediately. And haven’t come down since.

Price increases

A civil servant tells me that the recent salary increase has made him poorer!

How? Because his pay increase barely covers the corresponding increase in the cost of rent, fuel and groceries. This is his statement of expenditure:

We can’t do much about the increase in the cost of fuel and onions. They reflect price hikes in India and have nothing to do with salary increases here.

But we can’t allow rents and the prices of other goods to shoot up every time civil servants get a pay hike. This undermines the whole purpose of a pay increase. And it makes life for employees in the private sector that much more difficult.

Are you a civil servant? If so, has the recent salary increase made you richer or poorer?

Inflating prices

The effects of inflation on the prices of essentials …

Items

Rates

May June July
Stone Free Rice (ST Rice)

980

1050

1100

Nestle Every Day Milk Powder

190

215

245

Red Label Tea Leave  (500 gms)

145

145

145

Natural  Gold Refined Oil (1Kg)

55

60

65

Maida (1Kg)

20

22

22

Salt (1Kg)

10

10

10

Sugar (1 Kg)

40

40

45

Amul Butter

100

110

120

Amul Cheese

190

205

225

Misleading numbers

Spin doctor

Spin doctor

The other day Kuensel reported that: Bhutan’s gross domestic product (GDP) growth slumped to one of its lowest at 5 percent in 2008 despite the Druk Phuensum Tshogpa’s target of achieving a 9 percent growth rate annually.

To this Dr Saamdu Chetri, the head of good governance section in the cabinet secretariat and DPT party member, was quoted as saying: “With inflation going up to 9.2 percent and a global recession, a growth rate of five percent is still an achievement.”

There’s no doubt that the recent global recession would have constrained economic growth. So there could be some truth in Dr Saamdu’s claim that, given the recession, a 5% growth in GDP is an “achievement”.

But claiming that a 5% economic growth is an “achievement” because we experienced inflation of up to 9.2% is misleading. Inflation offsets real growth. So if inflation was 9.2%, then in real terms our economy did not grow by 5%; it would have actually shrunk by 4.2% during 2008.