Prices of most of the kitchen items remained stable this week past, according to a survey conducted by Business Recorder. This data would, no doubt, be welcomed by the people as well as the government. The specific items that registered stable prices included onions, tomatoes, green chilli, potatoes, carrots and radishes as well as an entire range of pulses.
A mixed trend was observed in fruit prices with citrus fruit registering a decline while other fruits including bananas, guavas, apples and good quality kinnows remained stable the week past in comparison to the preceding week. However, milk registered an increase in price of 5 rupees per kg and a slight increase was also witnessed in the prices of sugar and wheat flour.
Vegetable and fruit prices are mainly a function of supply and demand with supply varying from season to season. Transport is also a factor in pricing and hence any increase in the price of petrol or indeed a rise in the price of CNG would have a direct bearing on perishable food prices. Hence the general stability of prices of fruits and vegetables must be viewed in the context of their supply as well as no change in the price of CNG and petrol this week past in comparison to the preceding week. However, prices of sugar and wheat flour are a function of other factors as well, notably the existence of cartels that have been held responsible for creating artificial shortages to raise the price. Thus the rise in the price of these two items, however small, must be looked into by the relevant authorities and one would hope that they are successful in determining the reasons behind the rise in one week.
While the survey's conclusion was that prices of kitchen items had, by and large, remained stable during the week yet it is relevant to note that a survey of one week over another is not an adequate reflection of the Consumer Price Index (CPI) which also consists of other key variables that determine the rate of inflation including transport, utilities, rent and cooked food. The government, however, has claimed that the CPI has declined from a high of over 25 percent when the government took over power in 2008 to single digit today - statistics that prompted the Finance Minister to legitimately claim, when criticised by his cabinet colleagues that he has fuelled inflation, that, in fact, the price rise has come down significantly.
Three facts, however need to be highlighted. Fist and foremost, the public has not been able to perceive the rate of inflation declining as it is overwhelmed by the cumulative impact of inflation. Secondly, incomes have not risen by as much as the rate of inflation other than for the bureaucracy which has witnessed a pay rise well in excess of the rate of inflation during the tenure of the present government with 50 percent in one year followed by 15 percent in the next two years. The government did raise the minimum wage, however, its implementation remains a challenge and with rising unemployment due to a decline in economic activity attributed to heavy loadshedding and law and order problems the employers are not in a position to raise wages, a fact that those who are employed are well aware of. Thus real incomes are shrinking with a rise in the rate of inflation, which is a source of concern.
Finally, inflation is also rising due to flawed macroeconomic policies of the government which include the unprecedented and unbudgeted rise in reliance on domestic borrowing, which is forecast to lead to doubling of the budget deficit this year relative to what was budgeted. It is necessary therefore for the government to not only stop further domestic borrowing but also encourage private sector economic activity through dealing with the intractable inter-circular debt plaguing the energy sector as well as law and order problems throughout the country and particularly in the financial capital of the country - Karachi.