Kathmandu. Nirmala Shrestha, a housewife, said that the price of rice has increased by four hundred rupees when she reached the vegetable market in Kalimati in the morning. Amrit Ghorsayne, who was buying edible oil next to him, was complaining that even when the price of cooking oil was increased by Rs 40 per liter, the government was keeping oil in his ears.
This is not just the story of Nirmala or Amrit. Today, millions of consumers across the country are forced to suffer from such extreme inflation. On the one hand, the prices of consumer goods and fuel are skyrocketing worldwide, and on the other hand, the road network is damaged due to recent floods and landslides. On this pretext, retailers have arbitrarily increased the prices of vegetables, food grains, oil, pulses and rice.
The impact of the flood of the Rasuwa Bhotekoshi river on August 10 had spread to the banks of the Narayani river and the highway along the river. The landslide swept away the Tribhuvan Highway on the way to Narayangadh. The supply of essential commodities including foodstuffs, cooking gas, vegetables, fruits and other essential commodities was disrupted for a few days. Before the news of the landslide on the highway was broadcast through the online media, the traders increased the prices of food grains, pulses, and oil in stock, and sugar also became expensive. The price of vegetables could not be touched.
Impact of the global market: Consequences of dependence on petroleum and consumables
According to the World Bank’s recently released ‘Commodity Market Outlook October 2020’ report, overall commodity prices are projected to increase by 23 percent in 2026. Fuel prices are expected to increase by 32 percent due to the escalating conflict in the Middle East, the impact on food supplies in the Red Sea and Black Sea regions, and falling agricultural production due to El Niño. The World Bank has warned that the price of crude oil will reach $91 per barrel and the price of food will fall by up to 18 percent.
Nepal imports petroleum products worth more than Rs 3 trillion annually. This news is very dangerous for a country like Nepal that is dependent on the import of biofuels and large quantities of consumer goods. When the government does not pay attention to controlling consumer prices, the kitchen of Nepalis is becoming expensive day by day. Looking at the pockets of the consumers, the income is the same, but the expenditure has doubled.
As soon as the price of fuel increases, the transportation fare increases. As transportation becomes expensive, the price of everything from a small needle to a sack of rice in the market automatically goes up. Buying fuel and food grains at increased prices puts a serious strain on the country’s precious foreign exchange, which puts serious pressure on the balance of payment situation and trade deficit.
According to the recent two-month Current Economic and Financial Situation Report of the country released by the Nepal Rastra Bank, the revised overall inflation is shown to be around 4.1 percent. However, the reality of the retail market is very different from the government data.
The prices of vegetables and food grains have increased by 20 to 40 percent in the retail market, on the pretext that the supply chain has been disrupted due to the recent floods. There has been an unexpected increase in the prices of oil, pulses and rice. Although inflation is under control, the stock in the kitchen of the consumer has started to run out. The savings of the common man have come down to zero as more money has come out of the pocket while buying daily essentials.
The World Bank and Nepal Rastra Bank have revised their estimates that Nepal’s economic growth rate will be limited to 4.5 to 5.1 percent in the current fiscal year. The slowdown in economic activity and the increase in inflation have increased the risk of Nepal being pushed towards the risk of stagflation.
Lower and middle class families are now dependent on credits from moneylenders, cooperatives or retail shops to sustain their daily lives. The pressure of this borrowing, which has been taken to avoid festivals and daily needs, is pressing the common people mentally and financially. The cycle of increasing income but increasing loan installments and market prices is pushing the citizens below the poverty line.
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The people had high hopes for the majority government led by Prime Minister Balendra Shah. However, the presence of the government has been very weak in controlling the black market, arbitrariness of middlemen and skyrocketing prices in the market.
This time, the reason that consumers were able to feel the presence of the government during Dashain was that the transportation fare (bus, jeep fare) by land route was the same as before. After the police checked the highway at various places, the transport businessmen did not get the opportunity to misbehave this time due to the fear of fines and action.
Citizens complain that instead of taking concrete steps for consumer relief and market monitoring, the government’s activism seems to be more focused on social media posts and stunts. It seems that the government is failing to take action against black marketeers, facilitate supply and open subsidized shops. It is imperative that the government takes immediate and long-term steps to protect the common people from the impact of inflation and to stabilize the economy.
1) Short-term move:
Strict Market Monitoring and Action: Strict action will be taken against the middlemen and black marketeers who increase the price in the pretext of floods and landslides.
Operation of Fair Price Shops: Establishment of discount shops in every nook and corner of the country through Food Management and Trading Company and Salt Trading Company.
Speedy repair of blocked network: Repair of major highways blocked by landslides on a war footing to facilitate supply of food and vegetables.
Adjustment of tax on fuel: To temporarily reduce the infrastructure or other indirect tax levied on fuel to provide relief to the citizens when the price increases in the international market.
2) Long Term Steps
Promote the use of electric vehicles, electric stoves and hydropower to reduce dependence on petroleum products. Increase local agricultural production to break dependence on imported foodgrains, subsidize farmers in fertilizers and seeds, and build modern cold storages across the country. To strengthen the supply chain, break the monopoly of middlemen and create a transparent supply system from farmers to consumers directly.
The economic oppression that the Nepali people are currently facing is not only the result of the external crisis but also the result of internal misgovernance and lack of market control. If the government does not take concrete steps in time, the populist posts of TikTok and Facebook will not be able to satisfy the hunger and debt of the people.
