ISLAMABAD: Pakistan’s annual inflation eased to 3.9 per cent in March 2016 from 4pc in the preceding month on the back of decrease in prices of non-perishable products.

On a month-on-month basis, prices rose by 0.15pc in March from February.

The Consumer Price Index (CPI), used to measure prices of 481 commodities, has been on a downward trajectory for the past few months except February 2016, the Pakistan Bureau of Statistics (PBS) said on Friday.

A report of the finance ministry attributed the decline in headline inflation and other inflation indicators to effective monetary and prudent fiscal policies, along with better supply of commodities in the market despite floods and rains.

According to the report, vigilant monitoring of prices both at federal and provincial levels coupled with a fall in global commodity prices have also helped contain inflation.

Average inflation for the July-March 2015-16 period now stands at 2.64pc compared to 5.12pc a year earlier.

Core inflation, measured by excluding volatile food and energy prices, was recorded at 4.7pc in March 2016, slightly higher than 4.5pc in the previous month. Falling inflation has also encouraged the State Bank of Pakistan to maintain its key interest rate at a 42-year low of 6.5pc.

Core inflation has remained subdued since November last year because of a tighter monetary policy and reduction in food and fuel prices.

In March 2016, food inflation stood at 3.7pc, mainly due to perishable items. However, prices of non-perishable items dipped by 0.05pc in March 2016 as compared to the preceding month. The price of perishable food items rose 4.55pc during the period under review.

The price of chicken and poultry products are on the rise despite the fact that government has already extended concession in taxes, such as withdrawal of additional sales tax and exemption of withholding tax.

Pulse prices are also rising despite sufficient imports in the last few months.

Additional upward pressure came from a hike in prices of clothes and footwear, housing, water, electricity, gas and fuel, health, transport and furnishing equipment.

Market prices of certain consumer items like tea, milk and meat are also said to be increasing. One reason for surge in inflation is said to be the introduction of Rs40 billion new taxes on import of processed food and other items, and their prices have been rising November 2015.

The food items whose prices increased included chicken (13.92pc), fresh fruit (8.31pc), fresh vegetables (6.73pc), betel leaves and nuts (2.22pc), and potatoes (1.6pc).

Non-food inflation stood at 4.1pc in March 2016 compared to 4.2pc in the previous month. The price of personal equipment rose by 2.13pc, kerosene 1.23pc, medical test by 1.21pc, readymade garments 1.15pc and woollen cloth 1.11pc.

Average inflation measured through the Sensitive Price Index (SPI) was negative 1.27pc in July-March 2016, while Wholesale Price Index (WPI) was negative 1.49pc.

Lower WPI reflects less demand for domestic commodities, mainly because of low purchasing power. The entrance of manufacturing sector into a negative growth indicates deflation in economy.

Published in Dawn, April 2nd, 2016