Economist warns of double digit inflation

inflation   Development Economist and Principal Researcher, Point Pedro Institute of Development, Muttukrishna Sarvananthan has been quoted in the media saying that inflation would hit the sensitive double-digit sooner than later due to the fuel and electricity price hikes.

He has explained that according to the latest Household Income and Expenditure Survey (HIES 2009/10) undertaken by the Department of Census and Statistics, the average (mean) monthly household expenditure (nationally) was Rs.31,331; out of which Rs.18,064 (57.7%) was non-food expenditure.

Out of the total non-food expenditure the second highest expenditure (after housing) is spent on transport. That is, on average, every household spends Rs. 2,317 (or 12.8% of the total non-food expenditure) for transport.

In addition, average monthly household expenditure on fuel and light is Rs. 1,278 or 7.1% of the total non-food expenditure. Thus, almost 20% of the non-food expenditure is spent on transport and fuel/light.

He has observed that the foregoing figures are averages for the country as a whole. and there are differences between urban, rural, and estate areas, between different districts, and between different income groups, he has pointed out.

“The 20% national average expenditure (out of the total non-food expenditure) for transport and fuel/light will have considerable impact on inflation. Inflation would hit the sensitive double-digit sooner than later due to the fuel and electricity price hikes,” Sarvananthan has said.

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