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Record low inflation offers no relief

October 14, 2012

KARACHI, Oct 13: Despite record low inflation in September, people feel no relief, and doubts are being expressed on relevant government data.

Analysts and business community who apparently trust inflation numbers expressed their reservations over data collection mechanism and sought reforms to make data credible, so that it reflects the situation more accurately.

It was a common feeling among people that when inflation was as high as 26 per cent, they received the killing impact of it, and after an 8.8 per cent fall in inflation in September, there was still no feeling of comfort.

Mr Anees Majid, Chairman, Karachi Wholesale Grocers Association, said that people immediately do not realise, if prices of some products fall, because they are already under the stress of over 80 per cent inflation for the last four years.

Although the business community trusts figures provided by the Pakistan Bureau of Statistics (PBS), they say it may not be 100 per cent true and they feel that there was scope for improvement in the methodology for calculation of Consumer Price Index.

Researchers and analysts do not differ with the figures, particularly regarding low inflation, but they say it was the case of different perceptions. “This feeling has been there for the last many decades and is also in other countries. This is because a common person may not necessarily buy CPI basket,” said Mohammad Suhail, CEO of Topline Securities.

He said Pakistan Bureau of Statistic that calculates the inflation looks more independent now.

There had been a hue and cry among economists and stakeholders more than a decade back regarding figures, when the government was accused of meddling to show a better picture of economy. However, the figures were never challenged.

The State Bank, which is responsible for maintaining inflation, never doubted the figures provided by the PBS. The SBP maintains that supply disruptions push up demand, and cause price escalation or inflation.

The State Bank also holds government responsible for massive borrowing from the Central Bank that creates inflation.

The Central Bank provides many reasons for inflation, but never doubts CPI figures.

“Peoples tastes, preferences and consumption patterns change rapidly, and these should be incorporated while calculating the inflation. Since this is not the practice, it creates a wide difference in measuring actual impact on people affected by high prices every now and then,” said Khurram Shehzad, Director Research at Hoqani Securities.

Since collection of data is a sensitive issue, the government should make the PBS a complete autonomous body. Currently the Secretary, Statistics Division is authorised to hold the additional charge of the post of chief statistician. It means the government still has domination over the PBS.