Seeing monthly inflation rates sends shiver down the spine as the rates are skyrocketing along with declining rupee value and higher taxes to meet IMF conditions, all contributing to the economy to be in dire straits. On year-on-year basis, CPI inflation general increased to 31.5% in Feb 2023 as compared to 12.2% in Feb 2022 while the rupee’s value has depreciated 11.23% against dollar since the start of the current fiscal year, badly hurting the purchasing capacity of the nation.
To curb the inflationary pressures and as per the IMF recommendation, government opted for contractionary fiscal policy and high interest rates to dampen demand. Generally, to show growth, ministries restrain to put efforts to control inflation, however today the scenario is different.
The figures have exceeded expectations and become a reason to worry that where it will take us considering it’s not just inflation, rather stagflation; increasing inflation coupled with stagnant economy and very high unemployment rates. So, the authorities taking a back seat amid the inflation spinning out of control feels a little odd to the brains.
Apart from the general CPI rates, we see rates disparity within the markets and authorities are quite well aware of this. it is pertinent to mention that this type of inflation can be called as the consumer-led inflation since a lot of commodities are readily available in markets and we do not see any supply shortage that leads to price hike.
A single commodity being priced at different levels in shops, super markets, Sunday markets and stalls also holds a significant share in contributing to already soaring overall inflation situation in the economy and here we think to ourselves, who is responsible for this as this kind of price hike is not directed by any regulatory body/ authority and is leaving no stone unturned to bringing a social and economic chaos in the country.
Another aspect is wage-price spiral wherein we are partially stuck right now. When prices increase, employees demand higher wages that also fuels the rising prices, making it more difficult to control inflation.
Although the prevailing situation continues to grind the poor, employers who could afford are easing their workers and trying to compensate by raising salaries, packages and allowances to help workers match the rising cost of living that on the other hand further feeds the price hikes.
To maintain the living standards, such consumers continue to shop from the high end stores and buy commodities at higher rates which are easily available at lower rates as well. This boosts confidence of such sellers to charge higher since they are not accounted for that.
We would like to ask here, who should be questioned; the government, the institutions or the nation itself for being ethically wrong to contributing to something that is making the lives of poor a living hell.
The government has the capacity of setting price floor and price ceiling. Although setting these limits is generally discouraged in developed countries as it interrupts natural flows through which an economy regulates itself, in few conditions it becomes necessary.
In economies like Pakistan, price ceilings are generally implemented by the government to keep the product in an affordable range for consumers.
However, it has its own shortcoming as it gives rise to instances of stocking, food shortages, etc., as the sellers become puppeteers that start to control the supply to keep the market in their favour.
Demand, supply and prices are the three magic words whole economy twiddles on. Price will ultimately be determined by demand and supply whose full control goes into the hands of the market controllers.
For such instances to be prevented that are quite prevalent in Pakistan, local administrative bodies must take ruthless actions to control price difference of commodities and deliberate hoarding of goods.
Since price disparity is more common in food items category among all the commodities, the system should be regulated by bringing digitization in these sectors. Implementing-data driven techniques by promoting utilization of data banks will assist in keeping a proper check on produce and flow of supply in markets.
On the other hand, to escalate supply to match demand in an attempt to control overall inflation in Pakistan, agri production must be increased.
Although Pakistan is described as an agrarian economy, half of the country’s land has been urbanized.
However, techniques such as multi-layer farming, biofloc, etc. can play a pertinent role in increasing supply multifold that will partly act as a saviour against the devil of inflation the country is possessed with right now.
Copyright Business Recorder, 2023