Stopgap measures

February 14, 2020

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WITH the country’s politics beset with allegations and handwringing over food inflation across the country, the prime minister himself appears to be desperately in search of a way to bring down prices. His detractors argue that this is because the political costs of high inflation have put him and his government in a tight spot. Conversely, his supporters say that he is driven by a genuine concern for the suffering of the poor, who have been hit the hardest. But whatever one’s perspective, it is difficult to know whose advice the prime minister is acting upon. He has prohibited his government from exporting sugar and ordered the Competition Commission to move against flour millers. Some reports are emerging in major metropolitan centres that flour millers have begun to bring down prices, and if this trend continues, we could see inflation tapering off, perhaps even declining by next month. Perishables are a different story and could present a more complex challenge. But with the government moving into high gear to rein in inflation, ideas that might have been considered extreme in recent years seem to be returning to the table for discussion.

One example is the return of the ration card scheme, which presents new possibilities with biometric technology and the National Socio-Economic Registry database that the Benazir Income Support Programme created and operates on. A few months ago, as food inflation embarked upon its upward spiral, the prime minister ordered an increased allocation of Rs7bn for the Utility Stores Corporation. This time, they are planning an allocation of Rs10bn to expand the base of USC coverage by another 5,000 stores in the hope that they can reach a larger number of poor and deserving people in this way. But while such efforts might be lauded, they are not likely to go far in shoring up the government political fortunes if inflation continues to rise. The NSER contains data for 27m households across the country, and this can be augmented further by adding government employees in grades one to six. But tackling inflation through targeted subsidies carries its own risks. These are little more than stopgap measures, and given the amount of government attention and time they are soaking up at the highest levels, it would be better if such energy were invested instead in providing the kind of leadership that the economy needs in order to ward off the inflationary spirals that are breaking out.

Published in Dawn, February 14th, 2020