High and Rising Cost of Living

Editorial

The Covid-19 pandemic has taken a toll on all sectors of the economy and all aspects of life; there is no gainsaying that. Nor is the fact that it has accelerated the trend towards a shrinking middle class, the one that social analysts associate with furthering social mobility through its commitment to and investment in education. This has traditionally led to an overall improvement in the socio-economic level of society with widespread benefits across large swathes of society in terms of welfare and health, employability and employment, improved housing, along with numerous other opportunities that enhance social capital.

Through its impact on manufacturing and transport, the pandemic has severely affected jobs and supply chains, with the tourism sector the most vulnerable. But rupee depreciation, about 25% over the past two years against our main import currency, the US$, coupled with explosive rise in freight, may have buoyed tax and VAT revenues, but they have deeply affected the pockets of consumers. This is no doubt particularly the case in a small island state like ours which is so heavily dependent on imports to meet a large chunk of its needs. There are inevitable shipping delays, with the corresponding fallout on timeliness and availability of items of consumption, which are also reduced in quantity as all countries are also facing the same problem. Pharmaceuticals, for many of those requiring them to keep healthy or out of trouble, are reported to have doubled, or sometimes more, with no control. Food and groceries have similarly taken a bad hit.

It is true that the authorities have advanced a sum of Rs500 million as subsidy to the large supermarket and distribution chains so as to buffer the cost to the consumer, but without an adequate control of prices and an oversight of where the money is going, it is difficult to assess how far this measure has really had the desired effect of maintaining prices at affordable levels. In any case, there are witness accounts of families having had to cut down on the monthly rations, despite which on the average they have had to make provision for between Rs 1000 to Rs 1500 or even more as additional expense for the monthly ‘ration.’ The only silver lining is the prices of vegetables, which are reasonable, and in cases of some perishable products ridiculously low – but one has to wonder whether the vendors are breaking even, and how far they are being able to provide for their other necessities and amenities. The middle-income classes have felt the overall squeeze in their livelihood levels harder than others.

Couple this with the cost of construction which has spiralled upwards so much that, for example, those who had taken loans are not able to complete their houses according to original plans. They are having to stop without proceeding to finish, accommodating only what is essential for moving in and leaving the rest for later. Budgets have had to be revised upwards, even doubling initial estimates in some cases, and it goes without saying that this will have to be accompanied by slashes in other items of expenditure.

One may argue that there are always winners and losers in a crisis of this magnitude, but with middle-income families facing such a historic pinch, while Rs 80 billion of national reserves have been used to sustain the government budget, and another Rs 80 billion earmarked for the business sector, there is a rising feeling that the playing field has been tilted awkwardly against them. Official statistics on inflation rates this past year will be met with the same wry derision just that as official macro-economic statistics. They won’t satisfy those struggling to make ends meet and those watching their lifestyles shrink despairingly. It remains to be seen what form, if any, this resentment might take.

* Published in print edition on 3 September 2021