KARACHI, June 17: For households with monthly income of Rs3,000 or less inflation measured by Sensitive Price Index or SPI shot up by 12.75 per cent year-on-year during the week ending on June 10.

Data released by the Federal Bureau of Statistics (FBS) show that SPI inflation rose by 12.21 per cent for households with monthly income of Rs3001-Rs5000. For households with monthly income of Rs5001-Rs12,000 SPI showed an yearly increase of 11.67 per cent and for those whose income exceeds Rs12,000 per month SPI inflation was 11.66 per cent.

For all households put together yearly SPI inflation measured through changes in prices of 53 essential items was 12 per cent during the week ending on June 10. What does this indicate? This indicates that the lower the income of the households the higher the incidence of inflation.

The government and the State Bank admit that inflation is hitting poorer people harder but they have failed in arresting this trend. In his 2004-05 budget speech, Finance Minister Shaukat Aziz admitted higher incidence of inflation for lower income groups in the backdrop of "rising growth and changes in international conditions."

He made a particular reference to higher world oil prices and increased local prices of wheat. The minister mentioned the steps the government was taking to ensure that higher oil prices do not further push up inflation for the poor.

He said the government plans to provide Rs46 billion subsidy to Wapda and KESC to ensure that "consumers are not exposed to their inefficiencies" (which do have an impact over inflation).

The minister also claimed that because of the steps taken by the government "flour prices have begun to return to their normal level." But as he made this statement in the parliament FBS flashed fresh data on monthly price movements showing that the average price of wheat flour had shot up to Rs14 per kg in May 2004 from Rs12.84 in April.

This more than nine per cent increase in wheat flour price within a month showed that the wheat crisis was far from over. Since 32 out of 53 items including wheat and wheat flour in SPI basket of commodities fall in the Food Group changes in their prices impact significantly on SPI inflation.

Changes in food prices also have a lot of impact on the main CPI inflation or inflation measured by Consumer Price Index covering 374 goods and services. That explains why Food inflation measured by CPI moves side by side with increase in SPI inflation.

FBS data show that in July-May 2003-04 average CPI inflation rose by 4.22 per cent year-on-year but Food inflation measured by CPI moved up by 5.37 per cent. During this period average SPI inflation stood at 6.31 per cent. In May 2004 alone inflation measured by CPI and SPI showed a big increase of 7.13 per cent and 11.43 over May 2003.