Mukti

Khichuri Index

Posted in economics, labour, macro, politics by jrahman on December 15, 2012

Every political party in every election in Bangladesh’s history has promised to make rice, lentil, oil and salt affordable.  Affordability, of course, depends not just on price but also income.  The post on food prices doesn’t mention income, and is therefore potentially missing something big. 

This gave me an idea.  What do you get when you throw in a kilogram of coarse rice, 250 grams of red lentil, 40 ml soya bean oil and 10 mg salt?

That’s right.  You get a a rather bland plate of khichuri.  Ignore for simplicity how you cook it, or where you get the water to boil these in, or where you eat it.  If we have time series data on daily wage and the prices of these khichuri ingredients, we could work out a simple measure of ‘food affordability’.  That’s the idea behind the Khichuri Index.

Thanks to the good folks at CEIC, I have monthly data for retail prices of the four items in Dhaka going back to 1995.  I also have monthly data average daily wage for skilled and unskilled industrial workers going back to 1999.  All these data come with a lag — the lates price data I have is for February 2012, while the latest wage data is for December 2011.  The data is pretty jumpy, so I smoothed it by taking a three month moving average.

That still gives us a time span covering March 1999 to December 2011.  In March 1999, a plate of khichuri — using the above portions — cost 28 taka.  At that time, an unskilled industrial worker made 92 taka a day.  That means, the worker could afford about 3.3 plates of khichuri a day in March 1999.  In December 2011, the numbers were: 60 taka per plate, 206 taka per day, and 3.4 plates per day.  That is, after over a decade, food was only marginally more affordable for Dhaka’s working class.

Over the decade, however, as the chart shows, there was considerable variation.

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For both skilled and unskilled worers, food affordability increased in the late 1990s an early 2000s.  Essentially, food prices were steady, while wages rose gradually.  Then, from 2003 to 2008, food affordability declined — wages were still rising, but food price inflation outstripped income gains.  Then, in 2009, with food prices falling thanks to global recession, food affordability saw a sharp rise, which was then eroded in the following two years.

The above chart, simplistic as it may be, fits remarkably well with the changing popularity of successive governments.  I’ll update the chart as more data becomes available.  That chart will predict the next election much more than all the hype about the war crimes trial or relationship with India.

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  1. Puru Miah said, on March 27, 2013 at 4:32 pm

    Is it possible for you to create an index as to what the living wage will be for the working class in Dhaka and in rest of the country, similar to what is used in the north http://en.wikipedia.org/wiki/Living_wage, Thanks!


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