Knotty inflation

Wednesday, 4 January 2012 00:01 - - {{hitsCtrl.values.hits}}

INFLATION can break governments and change history. Therefore, it is important to see how this crucial factor of life fared in the last year and how it affected the general public. Even though the Central Bank has targeted a 5.5% average inflation rate for 2012, it is likely that the people will feel the grind strongly, as proven by the constant demands for higher pay.

The contribution to the annual average increase of 6.7 per cent in the Index came mainly from price increases in the sub category of food and non-alcoholic beverages (8.8 per cent) in 2011, observes the latest report from the Central Bank.

It is interesting to note that in the past year the average prices in the sub categaories of housing, water, electricity, gas and other fuels increased by 4.3 per cent, transport by 7.1 per cent, clothing and footwear by 13.4 per cent, furnishing, household equipment and routine household maintenance by 4.6 per cent, health 2.7 per cent and education 3.5 per cent were increased with the only respite coming from telecommunication, which remained unchanged.

The increase in prices of imported food commodities such as wheat flour and milk powder in the international market led to the increase in the food sub index and thereby the Colombo Consumer Price Index. Further, the upward price revisions of diesel, petrol, kerosene, LP gas and bus fares affected during the reference period also contributed both directly and indirectly to inflation.

The average price of rice was lower in 2011 when compared to 2010, despite a sharp drop in production in the Maha season, but the weighted average prices of vegetables increased by 7.4 per cent in 2011, when compared to that of 2010.

Although the prices of coconuts and coconut oil remained high in the first four months of the year, a clear declining trend was observed from May onwards, recording the lowest level in November. However, it would be remembered that the Government was forced to import and then destroy a consignment of coconuts during this period, showing that better planning and coordination is needed.

Among the other domestically produced food commodities, average prices of red onions and potatoes were higher by a whopping 61.9 per cent and 10.5 per cent respectively, while that of big onions decreased by 5.9 per cent, during the year when compared to the previous year.

Despite the growth in fish and seafood production by 15.5 per cent during the first 10 months of the year, the weighted average price of fresh fish increased by 6.0 per cent in the first 10 months of 2011 when compared to the corresponding period of 2010, clearly showing that consumers and fishermen need a better deal. Even though the Government has attempted to intervene by opening Ceyfish outlets, they are inconsistent in supply and too few to have an effect.

These statistics give a glimpse as to why the common man continues to struggle despite a growth in the overall economy. Inflation is a tough nut to crack, which is why traditionally the Government has been accused of “fixing” the numbers rather than finding more sustainable solutions to improve logistics, reduce post-harvest losses, decrease the power of middle traders and increase technology. Hopefully 2012 will provide better for the masses.