Massive increase in food prices from 2007 to 2012 pokes holes in government’s 12 percent poverty figure

A respected American Novelist Mark Twain once wrote, ““There are three kinds of lies: lies, damned lies, and statistics.”

This 1906 line used countless times since may come to haunt the incumbent government, which claimed to have halved poverty from 23.2 percent in 2007 to around 12 percent in 2012 as per the Bhutan Poverty Analysis report 2012.

The Bhutanese has found that the increase in food price figures (food price inflation) from 2007 to 2012 used by the National Statistical Bureau (NSB) as a key data to calculate the poverty rate in 2012 is much lower than the actual increase in food prices.

This would have lead to distortions in calculating the poverty rate showing poverty to be lower than it actually is.

Simply put the NSB had said that anyone consuming below Nu 1,704 per month in March 2012 is below the poverty line. So as per the NSB study only 12 percent of the population fell below the poverty line. But if the actual food inflation as found by this paper is used then the poverty line would increase significantly from Nu 1,704 thus increasing the poverty rate as more people would fall below this line.

This is because of the Nu 1,704.84 figure the major part comprising 67.7 percent or Nu 1,154.74 is for food consumption.

In 2007 the total poverty line was consumption of Nu 1,096.94 per month which after being adjusted for Consumer Price Index or inflation is calculated to be Nu 1,704.84 in 2012.

In the food component the NSB applied a food inflation of 68 percent from 2007 to 2012 to increase the food poverty line from Nu 688.96 in 2007 to Nu 1,154.74.

However, this paper has found that the 68 percent food inflation from 2007 to 2012 does not hold water when compared with the actual increase in food prices in the market.

In fact this paper found that food prices had increased from 100 percent to even 300 percent from 2007 to 2012 in most major food items like rice, dairy products, vegetables and to a lesser extent in meat.

This should mean that the poverty line in reality should be higher than Nu 1,704 per month and thus it would also mean that the poverty rate is actually higher than 12 percent.

The NSB in a survey on per capita household food consumption expenditure found that the four biggest food groups on which Bhutanese spent most amount of money on was Dairy products (20.39%), Rice (14.73%), Vegetables (14.24%) and meat (8.05%). This would comprise around 60 percent of money spent by an average Bhutanese on food.

This paper took the above items and compared its 2007-2012 prices and found that in all cases the food inflation was much higher than those computed by the NSB.

The Bhutanese talked to eight vegetable vendors in the Thimphu Centenary farmers market who have been selling vegetables and other items from seven to 13 years at the market. They are Choki Dema (45), Goma Rai (51) from Dagana, Tshering Deki (50) from Trashigantse, Ugyen Dorji (55) from Trashiyangtse, Chandra Kala (35) from Tsirang, Karma (55) from Kurtoe and a meat vendor Kezang (44) from Chukha.

To include a regional variation some prices were also compared to an agricultural Dzongkhag like Paro.

It was found that red rice which was around Nu 35 a ‘de’ (1.5 kg) in 2007 became Nu 100 in 2012 which is a 200 percent increase in price. Japanese white rice which was Nu 35 per kg in 2007 was Nu 65 in 2012 which is almost a 100 percent increase in price. Even in the rice bowl of Bhutan, Paro the prices were similar with a Nu 5 or 10 difference.

In case of dairy products a piece of ‘Datsi’ which cost Nu 10 to Nu 15 in 2007 was Nu 35 to Nu 40 in 2012 which is around a 200 percent increase in price. In dairy rich Paro the Datsi which cost Nu 10 in 2007 was available for only Nu 25 to Nu 30 in 2012. In Thimphu Butter cost Nu 150 per kg but it cost Nu 300 to 350 per kg in 2012 which is a 100 percent increase. Milk which cost Nu 20 per liter in 2007 was Nu 45 to Nu 50 per liter.

In Vegetables the price of local potatoes rose from Nu 10 per Kg in 2007 to Nu 30 per Kg in 2012. The price of Red Chilli trebled from Nu 50 for a small pouch to Nu 150 in 2012. Spinach rose from Nu 5 to Nu 20. Beans increased in prices from Nu 20 to Nu 70. Asparagus increased from Nu 30 to Nu 70. Tomatoes rose from Nu 20 to Nu 60 per Kg. There were similar increases in Paro though the vegetables there were slightly cheaper when in season.

Under meat the prices have increased in a more stable manner due to price controls on meat by the government. Sikam rose from Nu 240 to Nu 320 per kg, Beef with bone increased from Nu 100 to Nu 170, Chicken from Nu 190 to Nu 250, Dry fish increase from Nu 160 in 2007 to Nu 260 per kilo today. In Paro increase in meat prices were similar to Thimphu with minor variations.

Therefore, all the dramatic increases in food prices above show that the food inflation rate of 68 percent is underestimated and thus the Nu 1,704.84 per month poverty line is in accurate.  If the real food inflation is applied then this line whose majority component is food consumption would increase dramatically. This would mean that the poverty rate would also increase above 12 percent.

NSB officials said that their food prices represented the whole country in both rural and urban areas and that taking prices only from Thimphu would make the rates biased. They also said that the Consumer Price Index on food prices was monitored by the NSB on a monthly basis from food outlets.

However, the NSB does not have a cost of living index to compare the per capita consumption between various regions. They have instead used a Paasche Index formula to approximate the comparison.

NSB officials also maintained that their entire poverty report was sent to and checked by the World Bank who found nothing wrong with the techniques used.

However, this paper learnt that the World Bank while checking the methods of calculation never really checked the raw data or the real extent of increase in food prices.

Tenzing Lamsang / Thimphu