KARACHI, Oct 30: The State Bank says that poorer sections of population are facing a higher inflation rate. In its annual report for the period July-June 2003-04, released here on Saturday
, the SBP says that in June 2004, food inflation or year-on-year increase in the prices of the food items in the consumer basket of 374 items was 5.1 per cent for families with monthly income of Rs3,000 or less. For families with income between Rs3,000-5,000, it was 14.7 per cent and for those with income of Rs5,001-12,000, it was 13.8 per cent.
But for people with monthly income of over Rs12,000, food inflation was the lowest - 12.3 per cent. For all income groups combined, the rate of food inflation as part of the CPI inflation was 13.4 per cent.
The pattern of higher inflation for poorer people also reflected in the overall CPI inflation in June 2004, says the SBP report. It points out that for households with monthly income of Rs3,000 or less, CPI inflation was 10.4 per cent and for those with monthly income of Rs3,000-5,000 it was 9.8 per cent.
The report says that for households having monthly income of Rs5,000-12,000, CPI inflation was 8.8 per cent, but for families with monthly income of over Rs12,000, it was 7.7 per cent-the lowest. For all income groups combined, the CPI inflation was 8.5 per cent in June.
How hard hit was the common man by the incidence of inflation can be gauged from the fact that wheat and flour prices showed 24.7 and 26.5 per cent increases respectively in June 2004 over June 2003. The prices of beef and mutton in June this year were higher by 29pc and 33pc and those of onion and potatoes by 77pc and 60pc compared with their prices in June last year.
Petrol and diesel prices rose by 18 per cent and 20 per cent respectively. Chicken became costlier by 13.5 per cent, vegetable ghee by 11 per cent and fresh milk by 9 per cent.
Another pointer that inflation hit the poorer people the hardest was that in most of the big urban centres, it was below 8.5 per cent in June 2004. "For example, out of four provincial and one federal capital, only Quetta experienced the above-average inflation."
The list of the cities that saw a higher-than-average inflation includes Attock, Sargodha, Gujranwala, Okara, Sukkur, Turbat, Quetta, Bahawalpur, Lorali and Cantt, Sialkot, Khuzdar, Mardan, Jhang, Shahdadpur, DG Khan, Bahawalnagar, Faisalabad, Vehari and Samundari.
The SBP report says the above-stated "disproportionately high incidence of inflation for low income groups requires immediate and effective implementation of direct and indirect price monitoring mechanisms (e.g., the government may build up stocks of some basic staples) and also raises the question of the desirability of subsidized access to key staples.
The report says the acceleration in CPI food inflation since October 2003, onwards was largely "attributed to artificial shortages of wheat that were probably due to the realization that government's capacity to intervene was hampered by depleted wheat reserves".
"The rise in wheat prices probably contributed significantly to an increase in inflationary expectations that, together with rising transportation costs and higher export prices, subsequently led to increase in the prices of a number of important food staples."
In particular, a rise of 9 per cent in milk prices in June 2004 over June 2003 also pushed up the CPI inflation and the prices of beef and mutton continued to rise during fiscal 2003-04 due to demand from and export to the Middle East and Afghanistan.
