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

Prices of onion plants jumped yesterday, buoyed by a ban by India on the export of the item, traders say.The hurt of onions rose to Tk 36-45 a kilogram yesterday from Tk 32-42 on Thursday in markets in Dhaka, according to Trading Corporation of Bangladesh.The wholesale harms of onions overly rose.thither is a lack in the supply of onions in the market. Those who are put away hoarding stocks are reluctant to sell as well, said Idris Ahmed, owner of a wholesale store, Dhaka Baniyalaya at Shyambazar.He said onions were merchandising at Tk 35-36 a kilogram at the wholesale market of Shyambazar yesterday. Prices went up since Friday afternoon, after news 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 time in less than a year that India restricted onion exports to curb the ascending in prices, according to Indian news reports.On September 8, an Indian ministerial panel banned onion expor ts following a rivet rise in prices, reports Reuters, quoting Food Minister KV Thomas. The restriction came in effect on Friday. We will review the ban every fortnight, said Thomas.Bangladesh meets much of its local demand for onions by importing it from the neighbouring country.Since Saturday, 80 onion-laden trucks entered Bangladesh manger yesterday afternoon, our Chapainawabganj identical reports.No shipment took place at the Bhomra grunge Port 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 shipping onions against the antecedently placed orders by Bangladeshi importers.We are worried. If onions are not exported against the already opened letters of credit (LCs), we will incur losses, said Durul.The LCs came to a halt following the ban on exports, said Islam of the C& F Agents Associati on.The disruption in supply 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 last week, he added.This article talks about the rise in onion prices that has happened in Bangladesh delinquent to a shortage of onion. The shortage is due to the restriction on onion exports enforce by the Indian brass. This has resulted in a lessening in supply (the amount of a trade good that sellers are willing and able-bodied to sell at different prices) resulting in price rise.Price of onion in the market is determined by the demand (the amount of a commodity that consumers are willing and able to buy at different prices) for and the supply of onions. Initially the market was symmetry (this is the point where demand is equal to supply) at point E where at P* price Q* amount was purchas ed and sold.Due to the ban imposed by the Indian judicature 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 will shift the supply curve to the left over(p) from S to S1. This will result in a new labyrinthine sense E1 with a higher 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 will digest the quantity demanded and people with limited income or low income will waste to switch to the available substitutes (goods which satisfy the same wants) akin radish. Also industries like restaurants which use onions as inputs will experience an accession in the apostrophize of produced and will be forced to increase price to keep gain constant.The Indian establishments 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 being a necessary commodity will dedicate an inelastic demand (when for a certain component part change in price, the quantity demanded will change less than proportionate.) higher(prenominal) 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 buzz off onion stocks will gain from the higher prices.The Bangladesh brass may have to impose a subsidy (payment by brass to producers of goods and services both to increase supply or compactd cost) or maximum prices (price imposed below equilibrium price through legislation by the government to protect the interest of consumers) in order to control the onion prices. cookery of subsidy will result in a greater government expenditure which will have an opportunity cost (the nex t dress hat alternative for government) in terms of various welfare services which learn to be sacrificed. Imposition of maximum prices will result in greater shortages and may increase the problem.In order to switch with this situation the government of Bangladesh may resort to import onion from other countries which have surplus. except this is only a short run solution (time period during which at least 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 hanker run (time period where all factors become variable) the Bangladeshi government should embolden greater domestic production of onion. This can be done by giving subsidys to onion producers or spreading sensory faculty to popularise onion production.The government should also try and reduce onion hoarding by traders in Bangladesh market. H oarding is an illegal activity and the government should be vigilant to stop this. The government also need to ameliorate infrastructure facilities like irrigation, transportation and storage facilities to reduce the fluctuation in the supply of agricultural goods. The government can also build a buffer stock (a stock of essential food grain and strategic materials held by government to deal with unforced seen events) of essential food grains to reduce the fluctuations in the prices of agricultural products like onions. However all this involves a plenty of government expenditure which may result in higher government borrowing and greater taxes.