Villagers grow food for all. But they end up paying more for it

People living in rural Bangladesh have witnessed more erosion in their purchasing power and well-being than the urbanites as the former are paying more for both food and non-food items.

Consumer prices data from the Bangladesh Bureau of Statistics (BBS) show that inflation in the rural part of the country stayed above the figure in towns and cities in 31 out of 35 months since January 2021.

An elevated level of food price is one of the major drivers for the higher inflation in rural areas although villages, home to nearly 70 percent of Bangladesh's population, are the major supplier of staple food rice, vegetables, fish and poultry items.

In November, overall prices rose 9.62 percent in rural areas, higher than the national average of 9.49 percent. In contrast, inflation increased 9.16 percent in urban areas.

Rezaul Karim, who lives in Angura Mohammadpur village in Sylhet's Beanibazar upazila, says he is struggling to run his family as his monthly expenses have increased by Tk 6,000-Tk 7,000 in the last one year.

"Winter vegetables have started to hit the market but prices are still high."

The 35-year-old says he could purchase a 50kg bag of rice at Tk 1,700 to Tk 1,800 a couple of years ago whereas the same quantity costs Tk 2,800-Tk 2,900 now.

According to the BBS, food inflation in rural areas stood at 10.86 percent in November against 10.58 percent in urban areas.

Amid higher inflation, many people have been forced to cut back on consumption, especially that of non-food items, which has a bearing on the retail sales of clothing and other items in rural markets.

Fakir Alauddin Shaib, a garment and winter clothing retailer at Gilatala, a suburban market in Bagerhat, said people do not have enough income to spend on clothes.

"We had good sales of winter clothes in the same period last year. This year, sales are dull," he said over the phone yesterday, describing 2023 as worse than the previous year.

Swapan Mirza, who lives at Belkuchi upazila in the northwestern district of Sirajganj, said, "The prices of food items are almost the same in the cities and villages. In some cases, it is higher than in urban centres."

Against the backdrop of higher prices, a section of people is falling into poverty, according to a paper presented by a researcher of the International Food Policy Research Institute (IFPRI) at the BIDS Annual Conference on Development a week ago.

The IFPRI said at least 27.51 lakh Bangladeshis fell into poverty in 2022 due to the global food price hike and post-Covid-19 impacts. A global slowdown in 2023 might further worsen the poverty situation in Bangladesh and more than 50,000 people will fall into poverty this year too, it said.

A majority of people falling into poverty anew are from rural areas, it said.

Nationally, the ratio of people below the poverty line stood at 18.7 percent in 2022. It was 20.5 percent in rural areas, according to the Household Income and Expenditure Survey 2022 by the BBS.

Why is rural inflation high?

Qazi Kholiquzzaman Ahmad, chairman of the Dhaka School of Economics, expressed his surprise at the higher inflation in rural areas than in urban centres, saying there is no concrete answer to this.

"The diversified food basket for rural areas may contribute to higher inflation."

The BBS uses two sets of commodities (goods and services) to compute the Consumer Price Index for rural and urban areas. A rural basket covers 318 items while the urban basket consists of 422 commodities.

The shortage of supply might be a reason for the price hike as farmers sell products to middlemen at higher rates that are supplied to towns and cities, Prof Ahmad said.

Rizwanul Islam, an economist and a former special adviser for the employment sector at the International Labour Office in Geneva, said food inflation in rural areas outstripping the urban areas is counterintuitive.

"This is because most food items consumed there are presumed to be locally produced, and it is difficult to understand why their prices increased at faster rates than items that have greater weight in the urban food basket."

However, two things might have happened, he said.

First, the consumption pattern may have changed over time, so the conventional assumption may no longer be valid. Second, rural areas may be facing supply bottlenecks to a greater extent than urban centres, resulting in higher paces of price increases.

"These bottlenecks may range from transport costs to extortion on the highways," Islam added.

Binayak Sen, director-general of the Bangladesh Institute of Development Studies, however, thinks there are benefits from the higher inflation from the producer's perspective since they get better rates and can adopt developed technologies.

"When inflation rises, we usually discuss the consumer's side as they are hit financially."

Mohammad Abdul Malek, a research fellow at the University of Tokyo, said: "If you look at the US economy, you will find similar discrepancies and this happened mainly due to an increase in the prices of transport fuel."

In the case of Bangladesh, he said, this may be due to a spike in rice prices as it carries a major weight in the food basket.

The rate of coarse grain has crossed Tk 50 a kilogramme for nearly after a year, according to state-run Trading Corporation of Bangladesh.

A top official of the BBS said the state-run statistical agency collects price data and calculates inflation and it doesn't have any research wing to find out the reasons behind the figures.

Prof Shamsul Alam, a former state minister for planning, said not only food inflation but also general inflation has increased in rural areas.

"The rural inflation is mainly driven by demand-pull inflation."

He explained that rural incomes have gone up by an increase in the flow of remittances and diversified incomes of rural people and it is evidenced by the mushrooming of retail shops, restaurants, and large markets.

"There is not a single village or locality in Bangladesh that doesn't receive remittances."