Khichuri Index
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?
The fifth anniversary post — food price edition
Zombie ideas are those that refuse to die, no matter how strongly you debunk them. I suspect they exist in every discipline, but they’re particularly prevalent in economics. Tax cuts will solve every economic problem, or globalisation is bad for the so-called 99%, these are good examples in the western context. Syndicates of corrupt businessmen and politicians — Tarique Rahman and his Hawa Bhaban cronies, or the army, or Mujib Coat wearing men –are behind high and rising food prices — that’s the zombie idea in Bangladesh. For the past five years, I’ve been trying to slay this zombie idea, without much success.
In one of my first Forum pieces, I linked food price rises to the taka-rupee exchange rate — the basic idea is that rice market in Bangladesh is closely linked with that from India, and as taka depreciated against the rupee, domestic rice prices rose. Of course, by early, food prices were rising globally, thanks to American biofuels subsidies — I wrote about it here. By the end of 2008, with commodity prices tumbling world wide and taka appreciating against the rupee, I predicted that the incoming government would have a respite on the prices front.
And lo and behold, that’s exactly what happened.
This chart shows the three month moving average of retail price of a kg of coarse rice in Dhaka market. In the three months to June 1996, when the first Hasina Wajed government assumed power, rice price averaged 14.60 taka/kg. When she left office in July 2001, it was 13.36 taka/kg. In the countryside, prices were even lower. This was the origin of ’10 taka/kg rice’ boast. When BNP was toppled from power in January 2007, average rice price in Dhaka was 19.22 taka/kg. It rose to about 35 taka in mid-2008, before easing to 30.67 taka when Hasina Wajed returned to power. And then it fell even further, to reach 23.52 taka/kg in September 2009.
Inflation rears its head
Consumer prices in Bangladesh rose by 6.7 per cent in the year ending October 2009. Inflation has risen from 2.2 per cent in the year ending June. The rise is broad-based among both rural and urban areas. And it has been driven by a rise in food prices (Chart below).
Predictably, the rise in inflation has been blamed on colusive behaviour among the businessmen (see this Prothom Alo piece for example). The thing is, this ‘business syndicates’ story is almost certainly wrong, and it’s important that we think about real reasons why food (particularly rice) prices are rising.
Mukti 
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