Mar 29 - Apr 4, 2010

Pakistan being an agro-based economy has abundance of all agricultural products including food items naturally. Pakistan is one of the world's largest producers and suppliers of chickpea, apricot, cotton, sugarcane, milk, onion, date palm, mango, tangerines, mandarin orange, rice, wheat and oranges.

Pakistan is the world's fifth largest milk producer. Agriculture accounts for about 21 per cent of GDP. Rice is the third largest crop after wheat and cotton. Despite this the recent price hike especially of food items has badly affected the economy. The food inflation registered 15.49 per cent growth during January 2010. Non-perishable food item prices increased 14.76 per cent whereas perishable food items recorded 21.30 per cent increase.

Common man is in awfully deplorable condition. The government has failed to overcome the upsurge in prices of necessary items and it seems that it is enjoying siesta at the inflation front. The price of flour is hitting at around Rs25 per kg. Rice price per kg has gone up to Rs100 and above, sugar about Rs70 per kg and milk Rs50 per liter and so on and so forth.

Potatoes became dearer by 44.91 per cent and pulses by 44.43 per cent over the previous year. Nothing is left untouched as far as increase in prices of essential items is concerned.

People are even unable to meet two square meals a day. Majority of the people spend more than 50 per cent of their salary on kitchen items like flour, rice, milk and vegetables. Meat has become a dream for them. The shortage of food caused by hoarding increases its prices and creates a serious law and order situation in the developing countries including Pakistan. More and more people are being pushed below the poverty line and the middle-class is vanishing gradually. It is feared that if this situation prevails for a longer period, only two classes would be left the rich and the poor.

During 2001-04, inflation was very low. Interestingly, support price of wheat was not raised during 2001-03. CPI shot up again in 2004-05 when inflation reached 9.3 per cent. It dropped slightly to 8 per cent in 2005-06. This critical role of inflation can be explained by emergence of the phenomena like hoarding, assets price hikes, and surge in house rents.

Pakistan is listed among 36 countries facing food crises. A global surge in food prices is causing havoc across the developing countries and thousands of poor people are compelled to starve in the developing countries. There is almost no reason for food crisis and food inflation in Pakistan but the poor administrative measures like absence of smooth supply line, and checking hoarding and smuggling pose a serious problem. The market manipulation by hoarders of grains is also a major cause of food price hike. The point of concern is that prices of flour, the staple food of the people, have more than doubled while the price of edible oil has shot up over 100 per cent in a couple of years. Similarly increase in petroleum prices has tremendously added to inflation.

Under normal circumstances, there is an increase in employment and salaries, but in our country where inflation is in double digit, the employment rate is still low. It means the government policies are not consistent to support the poor and the middle classes. In order to control inflation especially food inflation in the country, the government should take corrective measures.

There is a recent rise in price of petroleum and electricity which is mainly responsible for fuelling the inflation during January 2010. The CPI also rose 10.79 per cent during the first seven months (July-January) of current fiscal over the corresponding period of last fiscal year. The government increased electricity and petroleum prices by an average of 12 per cent and 10 per cent in January, respectively, as one-time adjustment due to subsidy elimination for fiscal stability. The increased prices directly impacted over inflation (cumulative weight of 6.3 per cent in CPI basket). Conversely, indirect impact in terms of uneven increase in the transportation cost had negative impact on inflation outlook in the short-term. As a matter of fact the demand-pull, cost-push and structural factors are all responsible for inflation.

The number of poor in the country has surged from 60 to 77 million because of food inflation. The shortages and rising prices have now become a pretty much global phenomenon. While the crisis in some countries can be attributed to the global market, for a country like Pakistan, which has a sound agricultural base, abrupt shortage of wheat flour is hard to be linked with external causes. Despite persistent inflation and temporary shortages deliberately created by traders to manipulate prices a full-blown flour crisis came as a shock.

A major problem in Pakistan has been absence of authentic data on food production. Wheat is the staple food in Pakistan constituting 30 per cent of the cereal consumption in the households. The prices of wheat have usually been lower than those in the international markets over the years. The country reported a bumper crop in 2007, which when shortages hit the market and prices rose steeply, took everyone by surprise. In general, targets and practices of wheat sowing, production and yield are considered adequate for domestic needs.

In 1990-91 the production was 13.5 million tons while in 2006-07 it was 23.3 million tons and considered adequate for domestic consumption. However, recent fluctuations in production have begun disturbing the equation and variation in area cultivated, shortages of irrigation water and rains, quality of seed and rising input costs have been cited as causes. The demand scenarios of hoarders and smugglers and government's tendency to under-report or over-report are likely to exacerbate these fluctuations.

Since 2000, commodity prices and cost of services have been rising and wages and incomes, while also increasing, have failed to keep pace with that. The government has been ascribing such inflationary trends to rising growth rates. The government should ensure that the poorest consumers are protected from high and volatile food prices. International community should also support developing countries and take steps to generate more financial resources to help meet poor people's food needs.