The Consumer Price Index (CPI) declined to 3.80 percent in February 2018, reflecting a decline of 0.31 percent from January 2018. The press release issued by the Pakistan Bureau of Statistics (PBS) revealed that the major contributor to this decline was a reduction in the price of perishable commodities with a weightage of 4.99 percent - indices for perishables in January 2018 were estimated at 238.26 which declined to 221.02 by February; while non-perishable food items registered a marginal decline in indices from 231.22 to 230.60 giving a decline in combined indices for non-food and non-alcoholic beverages (inclusive of both non-perishable and perishable food items) from 229.27 to 219.58 with a total weight of 34.83 percent. This item accounted for a 3.42 percent of the rise in prices and it is fair to say that the improvement in perishable crop position for February over January is notably backed by onions, tomatoes, potatoes, eggs, gur, chicken, sugar, pulse mash and masoor. A year ago in February 2017, the rate of rise of food and non-alcoholic beverages was estimated at 3.10 percent, lower by 0.32 percent, with non-perishable items accounting for 2.42 percent inflation and perishable of 7.86 percent.
All other components of CPI notably clothing and footwear (7.57 percent weightage), housing, water, electricity, gas and other fuels (29.41 percent weightage), furnishing and households, equipment maintenance (4.2 percent weightage), health (2.19 percent), transport (7.2 percent), and restaurant and hotel registered increases in indices in February compared to January 2018.
The CPI is subject to the weight given to each of its components and in this context, it is relevant to note that PPP-led coalition government's Finance Minister Hafeez Sheikh summarily reduced weightage of food and non-alcoholic beverages from 40 percent to 34.83 percent as this component of the CPI was registering a high of 24 percent and thereby presented a considerably lower inflation figure than before with a simple stroke of the pen. Economists and sociologists maintain that in a country like Pakistan, the earlier weight given to food and non-alcoholic beverages was more appropriate.
The base year that is in use by PBS was 2007-08 - a year when the international prices of oil, a major contributor to the calculation of CPI, had peaked at over 140 dollars per barrel, the budget deficit had soared to over 8.2 percent considered unsustainable which has a major inflationary impact, and when the country had no option but to negotiate an International Monetary Fund (IMF) programme whose major condition is to end subsidies and ensure full cost recovery - conditions that have an impact on inflation. Data suggests that the rate of inflation in 2007 was estimated at 7.8 percent while in 2008 it rose to 12 percent. International prices of oil have plummeted during the incumbent government's tenure, and the recent rise has raised the price to around 60 dollars to a barrel well below what the PPP-led coalition government had to contend with, which in itself begs for a change in the base year.
However, it is relevant to note that in India inflation was higher at 5.07 percent for January 2018 against Pakistan's 4.42 percent; and in India cost of food and beverages rose by 4.58, the food index rose by 4.7 percent, with price rise of fuel and light inflation estimated at 7.73 percent - higher than in Pakistan. Does this reflect better performance by Pakistan's economic managers in dealing with Consumer Price Index or does this reflect some data manipulation with obvious political implications especially in the context of the upcoming general elections? Sceptics backed by independent domestic economists claim that the PML-N has been engaged in major data manipulation during its third stint in power and unfortunately there is sufficient evidence for this given the lack of rationalization of data between the PBS and other government data sources as well as credible industry sources.
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