The real dimension of inflation
By Sultan Ahmed
THIS newspaper published last week a study of the prices of essential goods during the last eight years. It showed the prices have risen three times in this period during which the rupee went down from 38 to a dollar to 61.
If the strength of the rupee is to be taken as a reflection of the strength of the economy, then this has happened at a time when the dollar has been falling steadily against the stronger currencies and has now touched the lowest ever against the Euro.
Not all prices have risen uniformly. Prices of some commodities such as Atta and sugar have recorded a lower rise because of the periodic official interference in the market and have registered a total price rise of 58 per cent in this period while the furnace oil has recorded a rise of 517 percent, vegetable ghee by 167 per cent and Basmati rice by 167 per cent, red chilies by 259 per cent.
Experience shows that prices do not rise in Pakistan, they simply leap up and up and make the consumers giddy.
All kinds of malpractices are rampant in the market. These include hoarding, profiteering , monopolies and cartel making. Everything except real competition, which is the essence of a free market, can be seen in the local trade.
All these practices promote adulteration of food stuff and medicines, even life saving drugs, are not spared.
We have all these evils in spite of the fact that a monopolies commission has been functioning for several decades but has done nothing to stop malpractices.
Now the monopolies commission is being converted into a competition promotion commission but it is groping in the dark as the official attitude is not conducive to fighting monopolies.
For all this we have consumer protection laws, consumer councils and other legal instruments meant to protect the consumer and they become vociferous during Ramadan when prices hit the roof.
We have on the other side the chamber of commerce and its apex body, the Federation, and various trade bodies like the All Pakistan Textile Mills Association, but they are there not so much to promote the industry but to protect and promote the industrialists themselves and they act as cartels in the industry.
It is easy for them to unite against consumers as a few communities in the country dominate these chambers and they are far from being democratic bodies.
Now some of the businessmen have become ministers and actively promote their business interests.
There is no dearth of laws in the statute book to protect the consumers. But like other good laws in the book they are not applied for the protection of the consumers and promotion of the interests of the have-nots.
As a result, the eight year average inflation is shown as about six per cent. It represents the accumulated inflation of 20 to 30 years and it is not reflected in the 300 per cent rise in prices in eight years of strong-arm rule. Hence, there is the gap between the official statistics and the reality as shown in the 300 per cent rise in prices in eight years.
The consumer looks at prices in terms of rupees and makes comparisons in rupees with the previous prices and finds the difference between the statistical presumption of the inflation and the reality as really chilly. We have several kinds of inflation.
We have the indigenous inflation caused by the constant rise in support prices of agricultural commodities beginning with wheat.
Now the wheat support price is to be raised to Rs500 for 40 kilograms although the farmers clamour for international prices which are higher.
This would give rise to higher wheat and Atta prices in Pakistan. We have the imported inflation particularly through the import of oil and edible oil as the prices of Malaysian palm oil have been going up and we have the inflation aggravated by continued devaluation of the rupee which now stands at
Rs61 for a dollar instead of Rs38 which was eight years ago.
Newspaper headlines talk of rise in price of sugar and other essential commodities and the fact is that the Pakistani consumer is losing because of the devaluation of the rupee in spite of the greater devaluation of the dollar.
Beef prices have been shooting up because of short supply. Chicken is not in short supply but the price is rising constantly and restaurants and hotels are raising their meal prices frequently.
Egg prices are rising, they are already Rs55 for a dozen.
As winter sets in and consumption rises, the prices will rise further.
Pakistan has signed a Free Trade Area Agreement with Malaysia which is a welcome measure. It is the first comprehensive FTA agreement between Pakistan and a South-East Asian country but the issue is whether the government will let the benefit pass on to the people and the businessmen will play fair.
With oil touching hundred dollars a barrel, power will cost far more now and gas prices will rise. That will also raise the cost of going to work and returning home.
Education is coming to cost more and more for the poor who want to avoid the government schools. Private schools are really raising their fees and other charges even for the low income groups.
Medical treatment is coming to cost more and more while the doctors’ bills are rising. The cost of medicine is also soaring. Although several industrialists including sugar mill and textile mill owners are in the cabinet, they have little concern for the very poor.
The average Indian is better off as he has to pay forty rupees for a dollar worth of goods, while Pakistanis have to pay sixty one and yet there is a clamour among the exporters to devalue the rupee — a demand supported by the Commerce minister Humayun Akhtar.
As the exports are slipping down and the July–October exports have recorded a widening of the deficit to $5.578 billion, it is for Pakistanis as a whole to protect the rupee and strengthen it at a time of ever-weakening dollar.
The rupee should be the index of the strength of Pakistan’s economy instead of being allowed to go down and get us into greater trouble.

