Economics Commentary- Prices of onions jumped yesterday, buoyed by a ban by India on the export of the item Essay

bes of onion plant plant plant plants jumped yesterday, buoyed by a ban by India on the export of the item, traders verbalize.The set of onions rose to Tk 36-45 a kilo yesterday from Tk 32-42 on atomic number 90 in markets in Dhaka, according to barter Corporation of Bangladesh.The sell prices of onions similarly rose. on that auspicate is a lack in the add up of onions in the market. Those who argon s bank lay away stocks are reluctant to sell as well, verbalise Idris Ahmed, owner of a wholesale store, Dhaka Baniyalaya at Shyambazar.He said onions were selling at Tk 35-36 a kilogram at the wholesale market of Shyambazar yesterday. Prices went up since Friday afternoon, after newlys of the ban by India, said Ahmed.The prices of locally produced onions also rose, influenced by the move by India, he added.This is the second gear time in slight than a year that India tieed onion exports to confirmation the hike in prices, according to Indian news reports.On September 8, an Indian ministerial panel banned onion exports fol modesting a steep upgrade in prices, reports Reuters, quoting Food Minister KV Thomas. The restriction came in effect on Friday. We give review the ban all(prenominal) fortnight, said Thomas.Bangladesh meets much of its local rent for onions by importing it from the neighbouring country.Since Saturday, 80 onion-laden trucks entered Bangladesh till yesterday afternoon, our Chapainawabganj correspondent reports.No consignment took place at the Bhomra Land interface yesterday. The trucks carrying onions that came to the Ghojadanga Land Port on the Indian side returned without shipment, our Sathkhira correspondent reports.Babul Hasnat Durul, an onion importer at Sona Masjid, said their suppliers are not fare onions against the previously placed orders by Bangladeshi importers.We are worried. If onions are not exported against the already opened letters of credit (LCs), we exit incur losses, said Durul.The LCs came to a c hoke up following the ban on exports, said Islam of the C& F Agents Association.The disruption in egress from India led to the hike in the prices of locally produced onions, said Mohammad Aminul Islam, an onion wholesaler at Karwan Bazar. He bought a 40 kilogram bag of onions from Pabna on Saturday at Tk 1,450, he said. Prices for the same stood at Tk 1,300-1,350 pop off week, he added.This article talks nigh the rise in onion prices that has happened in Bangladesh due to a shortfall of onion. The shortage is due to the restriction on onion exports impose by the Indian politics. This has settlemented in a decrease in summate (the amount of a commodity that sellers are volitioning and capable to sell at different prices) extending in price rise.Price of onion in the market is resolved by the demand (the amount of a commodity that consumers are pull up stakesing and able to buy at different prices) for and the make out of onions. Initially the market was offset (this is the indicate where demand is equal to supply) at point E where at P* price Q* amount was purchased and sold.Due to the ban impose by the Indian presidential term on exports of onions, the supply of onions in the Bangladesh market has lessen substantially. This is because Bangladesh relies on imports of onions from neighboring countries for the supply in its domestic marketThe decrease in supply bequeath shift the supply curve to the left from S to S1. This depart result in a new equilibrium E1 with a higher(prenominal) equilibrium price. As the article says that the price of onion rose to Tk 36-45 a kilogram from Tk 32-42The higher onion prices give reduce the step demanded and people with limited income or low income testament earn to switch to the open substitutes (goods which satisfy the same wants) the like radish. to a fault industries like restaurants which use onions as inputs will experience an subjoin in the cost of produced and will be forced to sum up price to keep profits constant.The Indian governings decision to restrict exports of onions will increase the supply of onion in the Indian market. This will result in lower onion prices in India, and hence Indian consumers will benefit. On the other hand onion world a necessary commodity will have an inelastic demand (when for a certain percentage change in price, the quantity demanded will change less than proportionate.) Higher prices in onion will result in a great expenditure of households and hence Bangladeshi consumers will be the losers. The Bangladeshi farmers and traders who have onion stocks will gain from the higher prices.The Bangladesh organization may have to impose a bonus (payment by government to producers of goods and service either to increase supply or decrease cost) or maximum prices (price imposed below equilibrium price with legislation by the government to protect the interest of consumers) in order to view as the onion prices. Provision of subsidy will result in a great government expenditure which will have an opportunity cost (the next vanquish alternative for government) in terms of variant welfare services which need to be sacrificed. Imposition of maximum prices will result in greater shortages and may increase the problem.In order to deal with this status the government of Bangladesh may resort to import onion from other countries which have surplus. barely this is only a short take out solution (time period during which at least(prenominal) one factor of production cannot be changed) solution to deal with the immediate prices. Imports will increase supply and thereby reduced price of this commodity and benefit the Bangladeshi households. To deal with this problem in the commodious run (time period where all factors hold up variable) the Bangladeshi government should encourage greater domestic production of onion. This can be done by giving subsidys to onion producers or dispersion awareness to popularise onion pro duction.The government should also try and reduce onion hoarding by traders in Bangladesh market. squirrel away is an illegal activity and the government should be vigilant to stop this. The government also need to improve infrastructure facilities like irrigation, transportation and storage facilities to reduce the mutation in the supply of inelegant goods. The government can also build a buffer stock (a stock of demand food grain and strategic materials held by government to deal with unforced seen events) of indispensable food grains to reduce the fluctuations in the prices of agricultural products like onions. However all this involves a lot of government expenditure which may result in higher government borrowing and greater taxes.