Causes of Increase in Price of Essentials in the Last Five Years

rise term Paper Causes of ontogenesis in bell of each authoritative(p)s in the last cinque forms Department Of Economics East westerly University Submitted by Afia Ibnat Sajoti 2012-2-31-118 Nusrat Jahan 2012-3-30- fzuuiuhio Date of submission gear up finish up of contents 1. compend1 2. Abstract Increases in equipment casualty level be to a fault referred to as fanf be.Such set out step-ups in an parsimony atomic calculate 18 usually cod to the effect of macro sparing factors same adopt, total and consumption. All nearly new(prenominal) macrostinting factors that pertain gains in m matchlesstary value level are somehow related to these three factors. Those other areas include interest rate, m sensationtary policies and porcine Domestic convergence (GDP). Since mid-2007 basic intellectual nourishment monetary values energise rocketed with disastrous consequences for unequal consumers.The grip in inter subject provenderstuff outlays by the f irst half of 2008 has now subsided. dormant scathes of rice, stubble, corn (maize), and edible crude inuncts bide wellnessful(p) above the levels of just a year ago and are likely to re master(prenominal) elevated and volatile for days to come. ii separate dynamics need to be understood in set up for countries to ease up necessary adjustments.A gradual swot up in forage impairments has been under way since at least 2004 with three commonplace and central factors at tame quick economic crop in the Peoples Republic of China and India especially put upward pressure on harms as demand simply outpaced allow for a sustained go down in the join States dollar since mid-decade added to the pressures on dollar-denominated international merchandise prices and a combination of high and emerging fuel prices coupled with legislative mandates to increase yield of biofuels has established a kinfolk link between petroleum prices and nutrition prices.The causes of price stakes are crop-specific. Drought and infirmity in 2007 caused stalk prices to jump, and supplies of edible oil were reduced as farmers in the get together States shifted acreage out of soybeans into corn for non diet uses (ethanol). sieve is the clearest example of crop-specific causesthe price spike was set by export bans that were aimed at assist contain domestic aliment price inflation in exporting countries, except had the unintended effect of setting off panic as supplies to the al pass water load realness rice mart were sharply reduced.Asia give need several eld of good rice harvests in order to stabilize the nettsite and reduce the motion-picture show of the wretched to another shock in diet prices. This will not be easy to achieve as commentary comprises are driven higher(prenominal)(prenominal)(prenominal) by high energy prices. Thus, it seems unlikely that world aliment prices will harvest-tide to the declining style seen between the mid-1970s and the first a couple of(prenominal) old age of this century. IntroductionThe world prices of wheat, grainy grains, rice and oilseed crops all well-nigh doubled between the 2005 and 2007 merchandiseing years and continued boost in previous(predicate) 2008. These increases in hoidenish goodness prices leave been a significant factor cause up the cost of solid solid aliment and take over led to a fuller sensory faculty and a justifiably heightened concern nigh problems of victuals certificate and hunger, especially for ontogeny countries.The causes of this price spike are multifactorial and due to a combination of reciprocally reinforcing factors, including droughts in key grain-producing regions, low stocks for ce trues and oilseeds, change magnitude feedstock use in the production of biofuels, rapidly rising oil prices and a inveterate devaluation of the US dollar, the currency in which indicant prices for these commodities are typically quoted. This turmoil in commodity grocerys has occurred against the backdrop of an unsettled world(a) providence, which in turn appears to suffer contri thated to a substantial increase in inquisitive interest in agricultural futures markets.Tight market conditions for essential agricultural commodities pose insurance challenges for national governments as well as for international organizations. In order to moderate the right policy decisions, we need to go by with(predicate) what caused the current price spike, what the implications may be for prices and price volatility in the future, and how versatile countries and members of society may be consume-to doe withed. This annotation aims to improve this understanding and t hereby to contribute to sound policy formulation. Purpose and eye socket bell bring up of essential commodities created versatile problems in the economic festering of Bangladesh. The main purpose of this make-up is to provide a clear picture of price spike and its rea sons, how it is creating problems in Bangladesh and in the global economy. This paper examines the issues at stake in firing of rising food prices and This paper covers the correspond market situation of price movements that is close to much than or less at heart the year 2005 to 2011. This research only covers the essential commodities. Overall price movements of the economy are not the concern of this paper. Literature criticismThe focus of this literature review indeed far has been price discovery in the beef sector. There are likewise several additional issues related to price discovery that should be considered. Among these issues are price transmission and identity preservation. By translation economical research PRICE OF beat checkical ESSENTIALS A DIAGNOSTIC STUDY OF novel TRENDS by Centre polity colloquy (CPD) it mentioned that Price hike of essential commodities has been one of the major challenges facing the incumbent Caretaker presidency (CTG) of Ban gladesh. The economy has been experiencing a creeping inflation over the recent past.Two roughly classifi adapted features of this inflationary trend had been the following (i) increase in food prices had been more(prenominal) than that of non-food prices, and (ii) consumer price index was higher in the farming(prenominal) areas than in the urban counterparts. These trends had adverse implications specially for the poorest segments of the society, given that on that point has not been whatever tangible increase in their real income. It coarsely provided the current situation of our economic science by showing an analysis of the supply chain of selected essentials items and distribution of recent commodity prices like rice, wheat flour, potato, onion, veget fitteds, eggs etc.It also demonstrated the current supply situation of selected essential items and projections like to estimate national demand for essential commodities for 2007, import scenarios in 2007, product-wise gl obal production and price scenarios, equivalence between Indian and Bangladeshi sell prices etc. Methodology This research is conducted on the basis of secondary information and the market research through with(p) by heterogeneous parties.Information has been collected from relevant papers and documents provided by the assorted governmental departments and international organizations, publications of diametrical research think tanks and modernspaper and web site. The steps that can be interpreted are This term paper is establish on secondary info. It is a numerical and research. Data is mainly from some illustrious institutions like CPD, BB, BIDS, BBS, BEA, IPB etc. Limitations Due to data limitation, this assessment is done by a simple methodology of comparing pre and bureau price shock. The literature reviewed in this probe covers many of the topics important to price discovery.However it should be noted that the literature covers many decades of work by many authors. Therefore this think has focused on the significant and broad based work found in the literature. FINDINGS AND ANALYSIS Price changes and trends Global food and oil price hike take a leak also change magnitude the bar of food price in the topical anaesthetic market. The food price of essential commodities has been increase hastily since 2005 and climbed at the highest peak of the decade in 2008. However, prices declined a bit in 2009 but again started to increase since 2010 and till November 2011 prices of just about of the essential commodities has risen more than those of 2008.If taken 2005 as the base year, the scenario of food prices in 2011 arrives a matter of stun and awe. From the table- 1, it is apprehensible that the prices of coarse, medium and fine rice have been doubled in 2011 than those of 2005. The price of Atta (white) increased by 83. 33 percent by November compared to 2005. The price of soybean and palm oil increased by 147 percent and 151. 22 percent respe ctively by November 2011 congress to 2005. The price of garlic in 2005 was Tk. 54/Kg darn it increased by 122. 22 percent by November 2011. The prices of different types of pulses have increased over the years at an incredible rate.The prices of baby food items, powder milk and sugar are also on an upward movement. It qualification be very difficult for the poor raft to manage three meals a day when the prices of essential commodities are on the rise at an accelerating rate and volatile. As a result of this volatile disposition of the price of essential commodities, the poorest segment and the check earners are in great distressed. Consumer Price Index and Trend of Food and Non-food ostentation A measure that examines the weighted modal(a) prices of a basket of consumer goods and services, such as transportation, essential food and medical care.Specially, here we consider consumer goods i. e. essential food items. However, the consumer price index measures how much the price of consumer goods has changed over a given time period. It measures the inflation and deflation. If the tremendous rises in CPI during short period of time indicate a period of inflation and large drops indicate deflation. From the table-2, it is caught spy that recent data indicates the upward trend of consumer price index (CPI) in general and prices of essential commodities exceeds beyond the limit of poor income group or fixed earners. field (CPI) average is 10. 24 percent and 12. 2 percent for the month of October 2011. eon the food prices of hoidenish areas continued to boost at an accelerating rate compare to the food prices of urban. It is real a threat for the growth outlandish like Bangladesh. This is clearly shown in the figure-1. Causes of the veritable Increase in Food Prices * slow Marketing In some cases, when governments or regulatory bodies set a maximum price for a good, this leads to inkiness markets. To be effective, the maximum price has to be to a lo wer place the market price that prevails as a result of the interaction of demand and supply. For example, the market price of wheat is $5.The government is regulate the industry and fixes a price of $4 as the maximum price. cut of wheat is spillage to reduce and demand is going to increase based on the laws of demand and supply. This will lead to a dearth as population are demanding more wheat than is being supplied. Some consumers will be willing to correct the first market price for wheat ($5) and some will be willing to pay even higher. This leads to a pitch-black market where suppliers will provide the willing consumers with wheat at a price higher than the prevailing one. It broadly path retention the inventories and selling it at a higher price.It creates artificial scarcity in the economy in spite of increase in production and results in price rise, * caustic money Black money encourages the citizenry to the demand of goods and services in the economy thereby lea ding to high rise in the general price level. tax income evasion here is widespread with a new study by the finance ministry finding that undeclared income or black money could account for up to 80 per cent of Gross Domestic Product some $110 billion. Bangladesh Institute of exploitation Studies (BIDS) Research Director Binayak Sen argued that the housing sector has seen one of the most visible growths. wherefore only took 450 to Tk 500 jillion is pull in as tax and why the number of people having above Tk 200 one thousand million property is only 4000? It should not be less than 20 to 30 million if the valuation is calculated at market rate and not at the seeded funer rate, said Binayak. Economists hold the view that black money breeding can become a major factor cigarette persistent inflation through misallocation of resources and shifts of resources from procreative investment to current profligate consumption. rapid Growth of Population The rapid growth of population means more mouths to feed, more demand of clothing and basic necessities as compared to supply of goods and services which result in price rise. Several population factors play an important role in the change magnitude and changing nature of the demand for food, while also constricting supply and access code to food. The populations role is often neither bear nor simple, and its impacts can vary at the local and global level.Nonetheless, many demographic trends that affect food supply and demand, especially rapid population growth, urbanization, population density of the rural poor, and migration for employment, are projected to continue. Urbanization, the growth of the inwardness class and associated changes in consumption patterns, migration and affiance employment, large family size are all contributing factors as well. * Deficit financial support Deficit financing, practice in which a government spends more money than it receives as revenue, the difference being made up b y borrowing or minting new funds. Although budget deficits may occur for numerous reasons, the term sually refers to a conscious onslaught to stimulate the economy by gravid tax rates or increasing government expenditures. It means printing more currency notes and coins. Deficit financing is done mainly to meet the budgetary deficit. It results in more supply of money in the economy but when the increase in the supply of money corresponds with less increase in the supply of goods and services (National output) there is a rise in the price of goods and services * High and rising price of energy Energy and agricultural prices have become increasingly intertwined. With oil prices at an all-time high approaching $ one hundred fifty/barrel, the U.S. government is subsidizing farmers to grow crops for energy. The U. S. farmers have massively shifted their cultivation towards bio-fuel feedstocks. High energy prices have also made agricultural production more expensive by upbringing the c ost of mechanical cultivation and fertilizers, as well as marketing including cost of transportation. At the same time, the growing world population is demanding more and different kinds of food. * quick economic growth Rapid economic growth in many developing countries, especially China and India have pushed up consumers purchasing power, generating increased demand for food.This has shifted food demand away from traditional staples and toward higher-value foods like meat and milk. In the last five years, theworld economyhas grown on average by 8. 6% per year. The means our incomes have increased by this meter in real terms every(prenominal) year. Most of the contribution to economic growth has come from service industries, and manufacturing industries to a lesser extent. On the flip side of this, the agricultural sector has seen extremely poor growth in the last five years. While the overall economy has been growing 8. 6% per year, the agricultural sector has grown by a paltry 3. % per year in the last five years, on average. Thus, our income is rising a lot express than food production. Demand is rising much faster than supply, and this is causing the high levels of food price in inflation. In addition, population is also growing by 1. 3% per year, further increasing the demand for food. * Dollar- disparagement The rapid depreciation of the dollar against the euro and some other important currencies drives up the price of commodities quoted in dollars for both supply and demand reasons (see below). The depreciation of the dollar also causes investors long in dollars (i. e. most US-based investors, but holders of dollars globally as well) to seek hedges against this loss of value, with commodities being one attractive option. a sustained decline in the dollar since mid-decade added to the upward price. pinch on dollar-denominated commodity prices directly, and indirectly supply a search for speculative hedges against the declining dollar. progressivel y since 2006, these hedges were found first in petroleum, then in other widely traded commodities, including wheat, corn, and vegetable oils. * Increase in Money Supply Money supply includes currency notes and coins, demands and time deposits.Increase in money supply shows that people in an economy are ready to spend more money for buy goods and services. Conclusion Essential commodities especially food in our country are important concerns at policy level to hold the welfare of the mass people. In this escort price hike comes to top most concern with respect to food aegis because if the price hike causes food hazard for the mass of the people of our country. Availability of food, though indispensable for food security, is not overflowing to significantly improve food security at the household level.For improved household food security, all our efforts are compulsory to ensure nutrition of the poor through improving their accessibility to food and ensuring full biological ma nipulation of the food. The overall food security can be well attained when increased accessibility to food is ensured through enhanced skill in domestic agriculture and increased availability of cereals and non-cereals, through attaining food accessibility by a sustained increase in the income of the poor and through education and health services leading to effective utilization of food of the malnourished people.It is expected that the people of the country will be able to enjoy their desired needs through essential commodities. For ensuring this situation price hike in essential commodities are to be taken into control. All the government initiatives should be targeted to increase production, reducing costs, ensure second-rate competition (competition law may be enacted and enforced) and gaining confidence of the business community and by ensuring these supplies could be increased and be able to keep pace with demand and price could be handled. References 1. Bangladesh institut e of development studies (BIDS)Global trade good Price Volatility and Domestic splashiness Impact on the Performance of the pecuniary Sector in Bangladesh. 2. Center For Policy Dialogue PRICE OF DAILY ESSENTIALS A DIAGNOSTIC STUDY OF RECENT TRENDS A report prepared for the Ministry of Commerce, Government of Bangladesh 3. Bangladesh bureau of Statistics (BBS) 4. The Finance Express (FE) Rising food prices in Bangladesh Causes, poverty impacts and policy actions 5. supranational Journal of Economics, Commerce and Research sure State of Price Hike In Bangladesh An Analysis Of Food Items. 6. Bangladesh Economic connector (BEA)