Feb 15 - 21, 2010

Despite the fact that financial managers of the Pakistan Peoples Party led coalition government have taken some pragmatic steps to bring down the inflation or maintain it at minimum level, the rising inflation is still one of the major challenges posed to the national economy.

Inflation is defined as a sustained increase in the general level of prices of goods and services. The rising cost of living has pushed people to unending problems, leading to frequent public protests. Following the latest increase in petroleum products' prices, transporters again increased the transport fares, making things much harder for people who depend on public transportation. High inflation has more impact on the fixed income groups and salaried class.

Statistics show that the CPI inflation swelled by 10.31 percent during July-December 2009-10 against the budgetary target of 9.5 percent for the ongoing fiscal.

Figures on inflation released by the Federal Bureau of Statistics showed that Wholesale Price Index (WPI) and Sensitive Price Indicator (SPI) increased by 5.25-percent and 9.76-percent respectively during half of 2009-10 as compared to the same period of last year.

Economic experts told Page that this rate of inflation was high in the prevailing situation with no significant economic activity taking place due to security concerns in the country. The government has already informed the IMF that the inflation for the ongoing fiscal year would be well above the budgetary target of 9.5 percent.

They said that structural problems in the economy were also compounding the inflation in the country while hoarding and artificial increase in the prices of essential commodities are major challenges to the economy.

The main commodities, which showed an increase in their prices during December 2009 over November 2009, were pulse moong (7.84 percent), pulse mash (5.42 percent), vegetable ghee (2.55 percent), jam, tomato, pickles and vinegar and tea (2.40 percent each), spices (2.16 percent), fresh fruits (2.14 percent), besan (2.13 percent), mustard oil (2.12 percent), gram whole (1.55 percent), dry fruit (1.46 percent), wheat (1.43), milk fresh (1.16 percent), fish and honey (1.11 percent each). The prices of woolen readymade garments increased (4.13 percent), hosiery (1.55 percent) and silk, linen, woolen/cloth (1.47 percent), LPG (1.42 percent) and firewood (1.35 percent), sewing machine, clock and needles (2.60 percent), marriage hall (1.02 percent), and furniture readymade (0.97 percent).

WPI inflation during December 2009 stood at 14.96 per cent over the corresponding month of last year. Analysts are of the view that the cost of living has increased around 40-50-percent during the last two years. Sensitive Price Index (SPI) has risen from 173 points in February 2008 to 254 in January 2010, while the prices of some essential items have surged from 250 percent to 300 percent. Particularly worrisome is the steep rise in food prices, which tend to hit the poor the hardest.

Statistics show that during this period, the price of sugar jumped from Rs 26 to Rs 70 per kilogram, and wheat flour from Rs 16.50 to Rs 30 per kg. A 250-gram packet of tea, previously priced at Rs 65, is now available at Rs 124.

Vegetable and fruit rates also showed a similar trend. Power rates for consumers also increased despite worsening load shedding.

Analysts believe that things are going from bad to worst particularly for people of fixed income group and labour class. Indifferent attitude of the government towards the plight of the ordinary people is a matter of concern while internal security problems are getting worst.

However, the SPI for the week ended on February 04, for the lowest income group up to Rs.3,000, has registered decrease of 0.11 percent over the previous week. The SPI for the week under review for the above mentioned group was recorded at 253.52 as against 253.80 in the previous week, according to figures of FBS. The weekly SPI is computed with base 2000-2001=100 covering 17 urban centers and 53 essential items for all income groups and combined. SPI for the combined group registered positive growth of 0.36 per cent as it went up from 241.14 in the previous week to 242.02 in the week under review. As compared to the corresponding week of last year, the SPI for combined group in the week under review witnessed increase of 18.18 percent.

As compared to the last week, the SPI for the income groups ranging from Rs.3001-5000 and Rs.5001-12000 decreased by 0.12 percent and 0.02 percent respectively whereas SPI for the income group above Rs.12000 increased by 00.78 percent.

During the week under review average prices of 11 items registered decrease, while that of 20 items increased with the remaining 22 items' prices unchanged. The items which recorded decrease in their average prices during the week under review included egg hen (farm), tomatoes, potatoes, onions, LPG (11 kg cylinder), garlic, sugar, vegetable ghee (loose), wheat flour (average quality), and red chilly.

The items that registered increase in their prices included petrol, chicken (farm), diesel, kerosene, gur, washing soap, moong pulse (washed), mutton, rice basmati (broken), gram pulse (washed), bananas, coarse latha, mustard oil, mash pulse (washed), beef, masoor pulse (washed), curd, wheat (average quality), milk (fresh), and firewood. The items with no change in their average prices during the week under review included rice (irri-6), bread plain (mid size), milk (powdered), vegetable ghee (tin), cooking oil (tin), salt (powdered), tea (packet), tea (prepared), cooked beef, cooked dal, cigarettes, sandal (gents), sandal (ladies), chappal, electricity bulb (60 watts), match box, bath soap, gas charges (up to 3.3719 MMBTU), electricity charges (1-100 unit), and telephone local call.

People are expecting relief from the government in the wake of continuous depreciation in Pak rupee. Hence, the government needs to do something concrete to check soaring prices of commodities and high rates of electricity and gas.