The New Nation - Internet Edition

The rate of inflation is rising higher and higher. From a little over two per cent in the early nineties, the rate of inflation, according to the latest available official estimate of it, was a little below 10 per cent. But the statistical accuracy of this official data is doubted. The unofficial but the more reliable estimate of the current rate of inflation, is well above the double digit and still climbing. A leading economist stated at a recent seminar that inflation is putting on a reverse the gains that were made in the struggle against poverty in the decades of the eighties and nineties. Poverty alleviation in large measure boils down to people having more disposable incomes in their hands after buying the basic necessities for survival. But disposable incomes for those people who have an existence below the poverty line have been dwindling progressively. In many cases, people are not having any disposable income left after buying the bare consumption goods for daily living or paying the charges of essential services at costs that have been going up and up without a pause.

They are finding it difficult to cope with the costs of living from their income and have turned indebted in many cases. Rising prices of goods and services are not problems in a setting where the money income of people also tend to rise well above the rate of inflation leaving people with their purchasing power intact. But this has not been the case now. Here, inflation has been rising steadily but purchasing power has not even caught up with the rate of inflation. Thus, in many cases, people have been worse off with their eroded purchasing power. Savings and investments are the stepping stones to economic advancement and it can mean economic advancement at both individual and national levels. A man who patiently saves taka one million over a period of ten years to see the value of his saving halved or less by inflation, will not progress far in doing things of value with the saved amount. In fact, such experiences might even turn off his desire to save. The rate of inflation needs to be on the low side for the full cycle of savings and investments to turn successfully.

The rate of inflation is also considered a very important macro economic indicator. It influences not only individual investment decisions but also the gamut of investment activities in the sphere of business. It significantly affects the decisions of investors. Investors want to be happy about the rate of returns. The rate of inflation that remains low and steady over the long haul serves as an incentive for investors. Investors feel inspired when they are convinced that the value of the profits they are making will continue to hold and not erode drastically over medium and long terms. Inflation control must thus be among the highest priority tasks of the government.