THE following is the first lesson in economics for the governor and all policy directors of the State Bank of Pakistan, the ministry of finance, politicians and economists: This year there has been a super bumper crop of yellow melons. Retail prices this year in Karachi have crashed to Rs15 to Rs20 a kilo as against Rs80 a kilo in last Ramazan.

This is purely economics. If supplies increase, prices for the consumers will fall down. Prices will not fall only by increasing interest rates. Only the interest rates should not be a tool to fight inflation. By increasing interest rates, policymakers are pulling down the whole economy.

To ensure growth, all institutions must play their due role in increasing supplies of nay item in addition to tinkering with the interest rates. Low interest rates are very essential for businesses to make a profit and thus encourage capital formation and investment in the economy.

The role of the multiplier in the economy and its deep understanding is very essential to steer our economy out of the storm. I wonder how many people in authority in various institutions really understand this phenomenon of important role of the multiplier before making a decision to raise interest rates and signing off the death warrant for the industries and consumers at large. The example of yellow melon is only one example.

Allowing import of fruits and vegetables in the country also raises the prices in sympathy of the same fruits and vegetables grown in the country, thus increasing inflation. Cooperatives must be encouraged to eliminate the blood-sucking middlemen who ensure that growers get pittance for their hard work in the fields. Cooperatives are very useful in providing technical advice and inputs to the poor farmers, besides giving them more money for their efforts to feed the nation.

Cooperatives are successfully working in many countries in the field of agriculture, dairy, etc. We must find innovative and new ways to put hard-earned money in the hands of the lower middle class and middle class group for the economy to sustain the growth.

That will require a lot of compassion and sympathy for the poor people which are greatly missing in our nation.

ABBAS AKBERALI
Karachi