The food inflation in Pakistan has cruised to double digit, from 6.9 percent last fiscal to 10.2 percent of the current fiscal, despite 5.0 percent growth in agricultural sector with an all-time high production of wheat, the main staple food.
According to the Economic Survey 2006-07, growth in the agriculture sector has registered a sharp recovery in 2006-07 and has recorded at 5.0 percent against the preceding year's growth of 1.6 percent.
Major crops have posted a strong recovery from negative 4.1 percent growth of last fiscal to positive 7.6 percent, mainly due to high production of wheat, (23.5 million tons) and sugarcane (54.8 million tons).
In spite of high growth of major crops than the previous year, the food inflation during the current fiscal remained higher than ever before. The food inflation is principally based on increase in prices of a few items such as rice, edible oil, meat, pulses, tea, milk, fresh vegetables and fruit.
Similarly the prices of various types of pulses have increased despite the fact that the production of pulses have increased to 75 percent as compared to the last year's production. In 2006, the production of pulses was recorded 4, 80,000 tons while in 2007; the production was 8, 40,000 tons. Since milk powder and tea are also important items, the domestic prices remained higher during the current fiscal.
When asked the reasons behind the price hike of food items Sulman Shah, Advisor to Prime Minister on Finance, irrespective of reasonably high production, he said that in 2007, the prices of the food items all over the world, have recorded an increase of 18 percent while in Pakistan, the food inflation has registered 10 percent increase. "This clearly indicates that we are facing less inflation as compared to the other countries of the world", he added. He continued that the main reasons for the increase in the prices of food items in the country during the current fiscal are widespread heavy monsoon rain causing floods in different parts of the country and disrupting the supply of essential food items.
He said that the prices of the palm oil at international level have increased because most of the countries of the world are now interested in producing bio-diesel by using the palm oil. "The government is in favour of retaining tax on the food items like vegetable oil because if there were no tax upon vegetable oil, the rich would get more benefits than the poor", he concluded.