Price hike due to Ramazan effect does not hold truth for every year; and it is not likely to be the case this year as well, as a close investigation of weekly price index, SPI, does not reveal significant changes in and around Ramazan.
SPI - or Sensitive Price Index as it is called - is a basket of essential commodities, primarily food items, which are consumed by low income group. And any one closely observing the index in the last four years, knows, that SPI does not jump by extraordinary levels in Ramazan, relative to months preceding and following it. Another common observation is the fact that SPI inflation generally tapers off after exhibiting sharp spike in a given month.
These trends imply that SPI inflation numbers in August and September - the months in which Ramazan is falling this year - would to be close to or less than 1 percent. This is because latest statistics show that SPI increased by a whopping 2.68 percent on month-on-month basis in July, compared with 1.17 percent growth in June.
So what is behind the hype over Ramazan price hike? There are two possibilities (a) volatility in retail prices is not computed by inflation data survey and (b) there is high consumption of few items such as dates, fruits and juices, whose prices show sudden increases but do not hold significant weightage in SPI.
Then there is an abundant supply of low quality food items sold at regular market prices - which create a perception that prices are higher - but are not recorded by inflation meter. Hence, one should look for quality products as their prices are unlikely to experience sudden increases in the coming weeks. Ramazan Mubarak!
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