Bhutan’s domestic inflation overtakes imported rate
BHUTAN’S inflation has always been associated with that in neighbouring India, because they share similar trends. But not any more.
The country normally imports almost 90 per cent of its commodities from India, including the inflationary trends.
The National Statistical Bureau’s Consumer Price Index CPI revealed that the average price of goods and services between November 2014 and November 2015 had risen by 3.59 per cent. However, the prices of imported goods rose by 2.69 per cent and the volume of imported goods increased by 4.60 per cent. This means that more than 60 per cent of the inflation is home-grown.
In October, the average price of domestic goods and services increased by 4.74 per cent, while that of imported goods rose by 2.51 per cent.
“Imported inflation has more weights,” an NSB official said.
Weights reflect the relative importance of each household’s total consumption expenditure. The more the spending or consumption of particular items in the economy, the more the weight. For instance, commodities like fuel and rice are attached more weight because the slightest fluctuation in price could influence the inflation rate.
The NSB bases the CPI on December 2012 prices and tracks the price movements of 151 items (436 varieties) in 20 districts and two major urban areas every month. Every item is attached with weights.
The CPI increased because the price of food rose by 3.19 per cent and that of non-food items by 5.42 per cent.
In contrast, prices of imported food commodities rose by 2.26 per cent and non-food prices by 3.04 per cent.
Officials also said the drop in the rate of imported inflation could be attributed to the global drop of crude-oil prices. Fuel and lubricants recorded a price decrease of almost 4 per cent between November 2014 and November 2015.
Similarly, the price of fruit also dropped by 4 per cent in the same period.
At home, however, the cost of catering services rose by almost 10 per cent in a year – recording the highest rate.
Housing, electricity and water also recorded a rise of 4.4 per cent, while education also became dearer by about 7 per cent.
Meanwhile, the elasticity of several goods and services could also influence inflation, as the slightest change in price can change the demand and supply.
However, inelastic goods like fuel, where there are no substitutes, would influence inflation because demand is not likely to fall, irrespective of an increase or decrease in price.
