Food prices have gone up alarmingly. The monetary values of food items such as rice, wheat, sugar, pulse, meat, fish, egg, restaurant meal, milk, milk product and edible oil, among others, are rising steeply. It is difficult to maintain the living standard due to the unprecedented impact of inflation. Inflation refers to the rate at which the general level of prices

for goods and services rises. It is generally measured

by the consumer price index. People have to pay more than before to avail the same goods and services. The earning of the majority is not indexed to match the rising inflation. Rising price of essentials push down the living standard of people as their earning is unable to cover up even the essentials like food.

The role of government to control the alarming rate of inflation could be crucial and critical. Insecurity is a part of every walk of life due to the lack of good governance. The evidences prove that political instability is on the rise which in turn overshadows the burning economic issues. Members of the Constituent Assembly (CA) seem to have no role at all in raising voice related to the economic issues as they seem to be unaware of how it functions. And, from the consumer’s point of view, they have the right to protest against the rising prices of essentials, particularly food, but they are not yet organized.

Nevertheless, the government has formed a high

level commission to monitor the prices of essentials. Though the step is highly appreciated, it has not

succeeded in meeting the targets, and with their efforts, they are not likely to. Two big parties NC and UML are in the government, and they do have thoughts on the issues of inflation, supply of essentials, food security considering the

late monsoon that will

affect the food production. However, they tend to ignore the issues because they are not playing a zero sum game. They have some positive strategies that could run in their favor. The Maoists do not have an agenda to protest against inflation.

Instead, they are protesting in a different manner. Why do they not raise the issues of public concern? The answer is not forthcoming. Amidst the lack of good governance and directionless vision in the mode of progress, the price of food items has increased in the market destabilizing the normal life of the people, particularly in the midst of Dashain festival.

In Nepal, the annual average rate of inflation as measured by the consumer price indices turned double digit in June/July of 2009 and is now continuously rising. It reached 13.2 percent from the level of 7.7 percent a year ago. There is no adequate argument to place

in favor of the rising prices of the essential commodities. The dispersion ratio

is 1.7, meaning that the overall inflation in June/July 2009 is 1.7 times more

than the overall inflation of a year ago.

The year on year food and beverages index rose by 16.7 percent in June/July 2009 compared to an increase of 10.1 percent in the previous year. The dispersion ratio is 1.7 meaning that the inflation rate of food and beverage in the review year is 1.7 times greater than the inflation rate of food and beverage in the previous year.

The price of sugar in the market is skyrocketing. The inflation rate is increasing by 45.9 percent in the review year. The same had decreased by 10.1 percent a year ago. The rate of inflation of pulses and combined index of meat, fish and egg in June/July 2009 was 25 percent and 23.4 percent respectively. The same was 14.2 percent and 7.7 percent respectively a year ago. The dispersion ratio indicates that the inflation rate in June/July 2009 of pulses and the combined inflation rate of meat, fish and egg are 1.8 times and 3.0 times respectively.

Recently, a donor agency has estimated that about 3.4 million people in Nepal are facing hunger, and malnourished. The short term output is primarily a function of supply side factors and food prices are market clearing. In the given context, a food supply shock in the midst of already high and rising prices at the annual average rate of 13.2 percent is bound to happen. The government has targeted to achieve more than 5 percent of annual economic growth. It requires a sizable investment which could be met by deficit financing as Nepal is confronting huge resource gap. These all can compound the economy’s problems by adversely affecting the general price level and other macro economic variables. A decline in the agricultural sector will have an adverse effect on the industrial and services sectors and a cost-push effect on other prices. And, given that the demand for food is price and income inelastic, an abnormal rise in food prices will have a negative impact on the demand for other goods and services, and, in turn, on their output and associated employment. Hence, the government needs to overcome its smugness and complacence, especially in the context of the crisis of peasant agriculture, presence of malnutrition and a widespread need for food.

Dr. Dhungel is Associate Professor, Central Department of Economics, TU