By Israr Khan
ISLAMABAD: Spiralling food prices and the weakening rupee pushed inflation to an all-time record high of 17.21 per cent in April, a 3.04 per cent rise in consumer prices over March. In April last year, the Consumer Price Index (CPI) inflation, a key gauge of price pressures in the economy, stood at 6.92 per cent, the Federal Bureau of Statistics (FBS) said on Monday.
Ten-month (July-April 2007-08) average inflation also went up to 10.27 per cent against 7.89 per cent recorded in the corresponding period of last fiscal. It is about 377 basis points above the target of 6.5 per cent for the current fiscal.
Economic experts say that the weakening rupee has contributed to the rise in the cost of living. Inflation dangers pose a headache for the central bank, though the State Bank has increased its discount rate six times since 2003-04 to 9.5 per cent to control inflation.
Unfortunately, the previous political government had totally failed in controlling the rising inflation, especially the prices of food items and the current political set-up also seems helpless in curbing the runaway inflation as the poor masses have still not got any respite.
For each one per cent increase in inflation, more and more people fall into poverty indicating the inflation is hitting poor consumers harder than the affluent class. Specifically, the poor are highly sensitive to price changes in food, particularly staple food items, economists say. Households are struggling to meet the minimum standards of living and they may have no choice but to cut down their expenditures on health and children’s education.
Rising inflation is also making it more difficult for pensioners and low-income people living on nominal incomes to make both ends meet. It is interesting to note that the high inflation trend in food has been noticed since the start of the last fiscal 2006. Food inflation was in double digits, averaging more than 10 per cent, during fiscal year 2006-07. During July 2006, it stood at 7.44 per cent, August 11.08 per cent, September 11.26 per cent, October 10.54 per cent, November 8.07 per cent, December 12.71 per cent, January 2007, 8.70 per cent, February 9.99 per cent, March 10.74 per cent, April 9.41 per cent, May 11.31 per cent and June 9.68 per cent.
Likewise, at the start of the new financial year 2007-08, it kept the same trajectory and during July 2007, food inflation stood at 8.47 per cent, August 8.62 per cent, September 12.97 per cent, October 14.67 per cent, November 12.47 per cent, December 12.21 per cent, January 2008 18.25 per cent, February 16.05 per cent, March 20.61 and April 10.46 per cent.
More worrisome was the Wholesale Price Index (WPI) which during April rose to 23.50 per cent from only 6.03 per cent in the same month of the last fiscal, which indicates further increase in general prices in the coming months.
The main concern is that in the basket of WPI, food prices in percentage terms increased by 10.96, fuel, lighting and lubricants 7.48, manufactures 2.67 per cent and building materials 1.41 over April 2007.
The CPI covers retail prices of 374 items in 35 major cities and reflects roughly the changes in the cost of living of urban areas. In the CPI basket, during April 2008, food and beverages showed 10.46 percentage points increase over April 2007, house rent 2.71 percentage points, transport and communication charges 1.33 percentage points, cleaning, laundry and personal appearance 0.94 percentage point, apparel, textile and footwear 0.52 percentage point, household furniture and equipment 0.28 percentage point and fuel and lighting charges 0.63 percentage point over the same month of the last fiscal.
In a span of just one month, egg prices were up by 27 per cent, fresh fruits 26 per cent, wheat flour 26 per cent, chicken farm 16 per cent, potatoes 10 per cent, wheat 9 per cent, gram pulse 7 per cent, basin 7 per cent, onions 6 per cent, cooking oil, masoor pulse, milk products, fresh milk three per cent over March 2008. Likewise, transport charges were up 14.72 per cent, diesel 13.53 per cent and petrol 9.51 per cent over the previous month.
Source: The News, 13/5/2008