With regard to factors contributing to the rise in the general price-level, it may be mentioned that on the demand side the following factors have operated: Rapid growth of population, increase in incomes, rising non-development expenditure of the government and increase in money supply.
On the supply side, the factors which have influenced price level are the following: Inadequacy of agricultural output, inadequacy of industrial output and high-priced imports.
According to the recent census, the population more than doubled since 1972, from 7.5 crores to 16.7 crores in 2020. The growth rate at 1.93 percent, coupled with rapid rising incomes of some sections of the population has caused large increases in the demand of goods and services.
Increase in the incomes of a sizable part of the population added to the demand for goods. The process, unaccompanied by a corresponding increase in consumer goods, raised the price level.
Deficit spending increases the money supply in the hands of people and if not accompanied by increase in the supply of consumer goods, it results in raising the price levels.
An increase which exceeds the genuine expanding needs of the community leads to higher monetization of the needs, such as transactions. This is another way of saying that prices are at higher levels.
In the last decade, a rapid accumulation of black money (earned through corruption) and assets had also caused the expansion of money supply. The inadequacy of appropriate goods and services, uneven distribution of GDP share to match the rising demand has been an important factor causing the price level to rise from the supply side.
With demand for these goods generally inelastic, even marginal change in output has caused disproportionate increase in prices. An important factor, which has contributed substantially in rapidly raising the price level, is the high prices the consumers had to pay for such vital imports such as petroleum, oil and lubricants, fertilizers, chemical products and luxurious items.
These have raised the cost of many products and since these imports are used in many vital sectors of the economy – like transport, infrastructure development, etc – these have exerted a significant influence on the general price level. Due to the losing purchasing power of the fixed income group during Covid-19, the middle and poor segment of the buyers by and large are facing a tough time .
Payment of zakat by the rich people helps reduce income inequality. Those who have enough money to buy scarce goods and services at a higher price essentially make it difficult for the poorer people to buy them.
Mismatch in supply and demand are caused or created by the greedy rich people. Through payment of zakat by the rich to the poor, there is, in fact, a transfer of purchasing power, empowering the poor to face the price hike more easily.
If they were kind and careful for the poor buyers, this mismatch could not happen. The payment of zakat culminates the sense of responsibility for caring for the poor buyers by rich sellers.
"Zakat purifies one's wealth," as Allah says in the Qur'an, and "It keeps one away from sin and saves the giver from the moral ill arising from the love and greed of wealth". Zakat management systems may pursue programmes to extend financial or other forms of support to the distressed, economically unproductive (due to old age complications, disabilities, prolonged sickness) and vulnerable people (orphan, widow, disaster affected, etc).
A mandatory process for Muslims, zakat is regarded as a form of worship. Giving away money to the poor is said to purify yearly earnings that are over and above what is required to provide the essential needs of a person or family. Through Zakat, the poor are cared for, which include widows, orphans, the disabled, the needy and the destitute.
A number of the UN's Sustainable Development Goals (1. No Poverty; 2. Zero Hunger; 8. Decent work) align with the goals of zakat. At least three categories of zakat recipients are directly related to achieving SDG. They include Al-Fuqara (the poor those living without livelihood means), Al Masakin (the needy who cannot meet their basic needs), and Fi-Sabilillah, a comprehensive concept that means in Allah's path and struggling for a righteous cause, like expenditure to promote Islam and all charitable purposes.
But Fi-Sabilillah can also relate to the provision of basic needs such as health and clean water and sanitation programmes. Zakat is mainly a tool that can potentially be very important in solving extreme poverty and hunger.
Social finance institutions like the zakat creates balance between the haves and have-nots in the communities. Without minimizing the available gap between the two sides, there could never be sustainability in economic life. Islamic Social Finance (ISF) has been underlined due to its financial inclusion role as one of the main drivers of sustainable development among academicians and specialists.
An entirely neutral institution to gender, zakat could be paid and received by both women and men. It does not privilege one gender over another if they are equal in their financial circumstances.
It can also play a vital role in economic growth by increasing the income of poor people and improving their consumption. Zakat funds can create income for poor people and enable them to purchase, for instance, gas for cooking instead of firewood or charcoal.
A practical illustration of such zakat fund management is the Zeebika or Livelihood Program introduced by the Center for Zakat Management (CZM) to ensure sustainable socio-economic development of the poor and needy.
Through conducting a baseline survey, the Zakat-deserving households are identified and grouped in Grass-Roots Organization (GRO) comprising 25-30 families. The group members, with a view to doing business can take interest-free funds from their joint account.
After engaging in business as per shariah (Islamic jurisprudence) rule, the members can deposit some portion as savings in their own account. The project also provides other services like healthcare, safe water and sanitation facilities, child and adult education, skill development training, awareness building, etc.
Thus, all the members are engaged in establishing a friendly society. Corporate business houses sponsor one or more Jeebika projects under CZM Corporate Initiative for Poverty Alleviation (CIPA) policy.
CZM has also projects like 'Insaniat: Emergency Support Programme' to extend financial or other forms of support to the distressed, economically unproductive (due to old age complications, disabilities, prolonged sickness) and vulnerable people (orphan, widow, disaster affected, etc); 'Naipunna Bikash: Vocational Training Program' to provide vocational training to the unemployed poor youth in order to build them up as skilled resources for appropriate employment.
There is also 'Ferdousi: Health care programme'. Essential healthcare is one of the fundamental human rights. The Ferdousi program was introduced for providing healthcare services and awareness building for distressed women and children.
'Gulbagicha: Pre Primary Education Project' aims to improve the quality of lives of the underprivileged children through providing education, food and healthcare services in order to bring emancipation from an unpleasant environment.
And finally, the 'Genius Scholarship programme' supports meritorious undergraduate students who are underprivileged to help them finish their studies and also in building their careers.
Dr Muhammad Abdul Mazid is a former government Secretary and former Chairman, National Board of Revenue. Contact: firstname.lastname@example.org