| CPI increases by 24pc in first quarter |
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| Written by Harris Badar | |
| Sunday, 12 October 2008 | |
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src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> The price pressure on necessary kitchen items left households struggling in meeting minimum standards of living and they might have no choice but to cut their expenditures on health and children’s education. Rising inflation is also making it more difficult for pensioners and low-income people to survive who are living on very nominal income a month. For each one per cent increase in inflation, more and more people fall into poverty as the poor are highly sensitive to price changes in food, particularly staple food items, economists believe. According to the latest CPI snapshot of the FBS, during September 2008, food inflation stood at 29.91 per cent pushing monthly inflation to 23.91 per cent which increased by 0.97 per cent compared to August 2008. Last year in September, it stood at 8.37 per cent. Average three-month Wholesale Price Index (WPI) inflation also stood at record high 34.31 per cent against 8.30 per cent in corresponding period of last fiscal. During the month under review (September 2008), it stood at 33.20 per cent against 9.28 per cent in September 2007. Huge jump in WPI-based inflation indicating further increase in retail prices of essential commodities and would ultimately aggravate inflation. Another factor responsible for worsening the situation is the dwindling value of rupee that touches lowest as a result of huge current account deficit. It is worth mentioning that during the last six months rupee depreciated by about 32 per cent and is now trading in open market at Rs80 a US dollar. This is also pushing prices of essential commodities up and making imports costlieróanother contributing factor for inflation. At the moment the government seems to be helpless to rein in the spiraling inflation and save rupee from free fall. CPI that covers the retail prices of 374 items in 35 major cities reflects roughly the changes in the cost of living of urban areas. According to it, in September 2008, transport and communication charges go up by 39.86 per cent; food and beverages by 29.91 per cent; fuel and lighting 21.48 per cent; clearing laundry and personnel appearances 19.30 per cent; apparel textile and footwear by 16.06 per cent; education 15.95 per cent; house rent 15.03 per cent; household furniture and equipments 12.67 per cent; recreation and entertainment 12.22 per cent and medical expenses increased by 10.73 per cent over September 2007. It is worth mentioning that the State Bank of Pakistan (SBP) coping with mounting inflationary pressure in the economy, few months back raised its key discount rate by 100 basis points to 13 per cent effective July 30, 2008, which is the fourth consecutive increase in last one year. Earlier, the central bank raised the rate by 50bps from 9.5 per cent to 10 per cent in July 2007 and some 100bps in January 2008 from 10 per cent to 10.50 per cent. In May 2008, the SBP suddenly took a tight monetary stance due to rising inflation and continuous depreciation of rupee against the dollar and increased the discount rate by 150bps to 12 per cent. CPI bulletin says that under the food and beverages group, during September 2008, onions prices go up by 17 per cent; fresh fruits 15.12 per cent; potatoes 10 per cent; gur 6.17 per cent; honey 5.73 per cent; gram whole 4.81 per cent; dry fruits 4.51 per cent; cereals 2.89 per cent; fish 2.87 per cent and gram pulse prices up by 2.57 per cent over August 2008. According to the CPI, diesel prices move up by 5.49 per cent; kerosene 4.45 per cent; tyre and tube 4.29 per cent; transport fare/charges 3.15 per cent and natural gas prices 1.81 per cent over previous month. It is interesting to note that high inflation trend in food has been noticed since the start of the last fiscal (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 it stood at 18.25 per cent, February 16.05 per cent, March 20.61 per cent, April 25.5 per cent, May 28.48 per cent, June 32.05 per cent, July 33.81 per cent, August 34.09 per cent and now during the month under review (September 2008), it stood at 29.91 per cent. Despite the adverse impact on the low-income group, no effective steps are being taken by the government to reverse the trend. The government seems to be indifferent to the plight of the poor and the lower middle class who find it increasingly difficult to make both ends meet with soaring prices of foodstuff and medical expenses. The most depressing aspect of the FBS bulletin was that in WPI basket, fuel, lighting and lubricants expenses move up by 52 per cent; building materials 40.12 per cent; food 30.61 per cent; raw materials 28.04 per cent and manufacturers’ price up by 16.69 per cent in September 2008 over corresponding month of the last fiscal. However, comparison of the WPI of September 2008 with the last month (August 2008), shows that during this one month wholesale prices of vegetables up by 45 per cent; onions 23.64 per cent; fresh fruit 22 per cent; gur 11.31 per cent; potatoes 9.79 per cent; powder milk 7.47 per cent and gram whole prices increased by 6.63 per cent. |
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