Food inflation hits low-income people hardest: CPD

High inflation remained a major concern in Bangladesh’s economy in which, food inflation causes the heaviest strain on ordinary people, especially the low-income groups.

Rising food costs not only increase their living expenses, but also severely hits nutrition, education, health and savings.

Research organization, Center for Policy Dialogue (CPD) highlighted such findings on Thursday, July 30. Insights were presented in a dialogue titled ‘Food Value Chains in Bangladesh: Markets, Profit Margins, and Middlemen’ at BRAC Inn Center in Mohakhali, Dhaka. 

Commerce Minister Khondokar Abdul Muktadir attended the event as the chief guest. Agricultural economist M. A. Sattar Mandal and other domain experts also participated.

CPD Executive Director Fahmida Khatun spoke at the dialogue and said; inflation has remained at an elevated level for the past few years. It continues to pose a challenge to the national economy. Rise in food prices directly hampers citizens. 

She further noted, the burden of food price hikes does not affect everyone equally. Low-income households spend their major earnings on food. For this reason, price hike makes it difficult to buy food. 

Explaining the causes behind food price surge, Fahmida Khatun stated that it is a complex issue. Factors such as production costs, marketing, supply chains, natural disasters, market inefficiencies, hoarding, supply deficits, and lack of competition all play a role. Therefore, no single factor can be blamed for rising food prices.

On the large price gap between farmers and consumers, she explained that the supply chain involves many stakeholders, including petty traders, wholesalers (bepari), and commission agents (arotdar). This causes prices to increase at every stage.

CPD Senior Research Associate Fakhruddin Al Kabir presented the keynote paper. He emphasized that food inflation in Bangladesh is driven by more than just production costs. Market structure, middlemen, hoarding, supply deficits, and market dominance also play significant roles.

He disclosed that nearly 30 per cent of the country's population still suffers from food insecurity. High inflation has limited real wage growth and eroded consumer purchasing power. Consequently, people are breaking their savings or taking loans, which raise the risk of poverty.

Fakhruddin Al Kabir stated that both general inflation and food inflation climbed from April 2023 through June this year. Though inflation dropped slightly in 2024, it is rising again. Currently, food items account for nearly 59 per cent of the Consumer Price Index (CPI).

The study revealed that the poorest 5 per cent of households spend 59.8 per cent of their total income on food. In contrast, the wealthiest 5 percent spend only 28.9 per cent on food. As a result, low-income groups bear the heaviest brunt of inflation.

The study outlined the percentage increase in prices from farm to retail level: green chillies increased by 116 per cent, rice by 100 per cent, onions by 87 per cent, pulses by 78 per cent, brinjal by 72 per cent, potatoes by 50 per cent, eggs by 25 per cent, chicken by 22 per cent, beef by 13 per cent, and rui fish by 10 per cent.

To reduce price volatility in the food market, the CPD offered several recommendations. These include streamlining supply chains by removing unnecessary intermediaries, boosting competition in wholesale markets, strictly monitoring hoarding and artificial shortages, establishing direct links between farmers and consumers, regularly publishing market price data across all tiers, and improving modern storage, cold chain, and transport infrastructure.

-SA