The type of cause and effect paragraphs are detailed and very informative. It will explains good information about the topic, which will, in turn, enable a student to write accurately in examinations. Here is the cause and effect of Price hike paragraph:
Cause and Effect of Price hike Paragraph for HSC
The incessant price hikes have turned into an incessant economic killer for millions of citizens at large, reshaping the socio-economic landscape of Bangladesh. The current inflationary pressure is the result of complex domestic and global factors. Second, their intermingling to create ripple effects across different sectors of the economy adds to it.
The country’s annual inflation rate surged to 8.78 percent in February 2023 from 5.57 percent in the previous month, according to the Bangladesh Bureau of Statistics. It marked the highest rate in the last three months, driven by an increase in food prices to 8.13% in February from 7.76 percent in January. According to the data from BBS, food inflation in the country averaged 6.42% from 2013 to 2023, with the highest rate of 9.94% recorded in August 2022.
Fluctuation in the global commodity market is one of the major reasons behind price increases in Bangladesh. As a country that imports almost 80% of its petroleum products and a huge quantity of its food grains, Bangladesh remains highly sensitive to price shocks at the international level. The 2022 Russia-Ukraine conflict saw global oil prices shoot up; for instance, Brent crude surged to $139 per barrel during March, its highest since 2008. Such a steep rise in oil prices pegged a higher cost of transport, which had a knock-on effect on the prices of almost all commodities here in Bangladesh.
The BPC has reported staggering losses amounting to more than 80 billion taka in the 2021–2022 financial year. This heavy loss, owing to the mismatch between international and domestic fuel prices, incurred an added financial burden and consequently spiked prices at home, beginning with transportation and rising food production costs.
The growing prices have also been driven by supply chain disruptions. The COVID-19 pandemic showed weaknesses in global supply chains and caused shortages, thereby raising the costs of imported goods. According to the Bangladesh Trade and Tariff Commission, the cost of shipping a 40-foot container from China to Bangladesh surged from $2,000 back in 2019 to over $12,000 toward the end of 2021, thereby escalating the costs for imports of raw materials and finished goods.
Indeed, the major factors that cause price inflation are of domestic origin. A Bangladesh Agricultural Research Council report suggests that from 2020 to 2022, agricultural production costs rose by 30 percent as farmers had to bear the brunt of increased prices of fertilizers, pesticides, and labor. It is this pressure of raised production costs that has to be passed on to the customer in terms of food price rises. The BPDB has also been running into losses, and the amount reached 118 billion taka in the 2020–2021 fiscal year. These periodic bouts of readjustments in electricity tariffs do hit both household expenses and industrial production costs.
The consequences of these price hikes are ubiquitous and multi-dimensional. According to a CPD study in 2022, real income among the poorest 20% fell by 14 percent in 2020–2022 due to price hikes, consequently pushing an estimated 3.4 million people below the poverty line. That very simple fact points out how inflation affects low- and middle-income groups the most.
Of particular concern is the impact on the food situation. Based on an estimate by the World Food Programme, food insecurity will affect 24.6 percent of Bangladesh’s population in 2022, with price hikes being one of the major factors. The price of rice increased by 7.1 percent year-on-year in 2022, as per data from the Department of Agricultural Marketing, which will further add to the extra pressure put on household budgets by the staple food.
It also affects the business sector. In 2022 alone, a survey indicated that 68% of small and medium enterprises reported reduced profit margins due to increased production costs, while 23% were considering reducing the workforce as a way of managing expenses. This has a bearing on employment and general economic growth.
The educational sector has not been left out either. The 2022 study by BRAC University says that 12% of the poor drop out of school as a result of their parents not being able to bear the expenditure in school since the rise in the cost of living. This will drastically increase the educational gap and turn out to be an impediment to long-term human capital formation.
It has taken various measures to fight back the challenge of price hikes by expediting social safety net programs. In the 2022–23 fiscal year, it allocated 1.13 trillion taka for social protection. It has increased by 12.28 percent from the previous year to cushion the shock among the weaker sections.
Monetary policy is an absolutely necessary tool for both inflationary control and management. Keeping taming inflationary pressure in mind, the Bangladesh Bank adopted a contractionary monetary policy in 2022 by raising the policy rate from 4.75 percent to 5.75 percent. However, it is very difficult for the economy to balance appropriately between the control of inflation and growth.
Besides, the initiatives taken to increase domestic production have been aimed at reducing dependence on imports. The Ministry of Agriculture recently estimated a moderate 2.2 percent increase in food grain production as a step toward greater human security and price stabilization. Moreover, the government has been generating renewable energies to lessen the import bill of fossil fuels; the Sustainable and Renewable Energy Development Authority has set a target to generate 40 percent of electricity from renewable sources by the year 2041.
However, the most challenging task is to put an end to price hikes. According to a systematic review of causes and consequences published in the Journal of Financial Economic Policy, some of the major factors that can be blamed for the inflationary pressures are global oil prices, inefficiencies in supply chains, a lack of competition in some sectors, and government policy. The research concluded that in the case of Bangladesh, the study indicates a close relationship between inflation and changes in global oil prices, government spending, and supply inefficiencies during the period 2010–2020.
The review also added that market manipulation has contributed to the hike in prices. Business malpractices like hoarding and artificial supply shortfalls, according to the Consumers Association of Bangladesh, play a big role in sudden price increases, mainly in the case of essential commodities. CAB reported that in its case study last year, there were cases of up to 50% price hikes of some essential items following market manipulation despite stable global prices.
These price increases have impacts that extend beyond economic data points into the realm of social dynamics and public health. A study in the Journal of Health, Population, and Nutrition states that the issue of food cost inflation is related to increased malnutrition rates, especially in children from poor households. It is noticed that for every 10% rise in food prices, there was a 5% increase in stunting rates among children below five years.
The issue of price hikes in Bangladesh is complicated; therefore, it may require a multi-faceted approach: improved monitoring and regulation of markets, building up of capabilities in domestic production, diversification of sources of imports, and developing social safety networks. Besides, infrastructure buildup for reducing inefficiencies in the supply chain and increasing competition in certain key sectors will help absorb or cushion the domestic market from shocks due to global price changes.
The price hike in Bangladesh is the result of a million different global and domestic dynamics; its ramifications on the economy and society are simply immeasurable. The government has taken multiple steps to combat this challenge, though what it requires is consistent effort and out-of-the-box policies toward ensuring economic stability and shielding vulnerable populations from price shocks.