KARACHI, June 11: Yearly inflation, measured by the Consumer Price Index, shot up by 7.13 per cent last month and by 4.22 per cent in 11 months of the current fiscal year 2003-04, against the full fiscal year target of 3.9 per cent.

Cutting through jargons it means that the value of Rs1,000 in May 2003 fell to Rs928.70 in May 2004, and the average value of Rs1,000 in the July-May 2002-03 period decreased to Rs957.80 in July-May 2003-04. Theoretically this fall in the purchasing power of the rupee has affected all Pakistanis across the board.

But for those households whose monthly incomes range between Rs3,000 and Rs12,000, the purchasing power of the rupee has declined by a bigger margin. Data released by the Federal Bureau of Statistics on Friday shows that a year-on-year inflation measured by the Sensitive Price Index recorded a big increase of 11.43 per cent last month and 6.31 per cent in July-May 2003-04.

This means that for the households with a monthly income of Rs3,000-Rs12,000, the value of Rs1,000 in May 2003 fell to Rs885.70 in May 2004, and the average value of Rs1,000 in July-May 2002-03 decreased to Rs936.90 in July-May 2003-04.

The data shows that inflation measured by the Wholesale Price Index moved up by 7.46 per cent year-on-year last month and by 11.54 per cent in the July-May 2003-04 period.

This indicates that for those who buy a vast range of items at ex-factory or wholesale prices for onward selling or holding stocks, the purchasing power of Rs1,000 in May 2003 fell to Rs925.40 in May 2004.

For them the average purchasing power of Rs1,000 in July- May 2002-03 decreased to Rs884.60 in July-May 2003-04. In Pakistan, like in most countries of the world, the CPI serves as the main indicator of inflation as it reflects changes in retail prices of a big variety of 374 goods and services.

The SPI, on the other hand, represents inflation for people in the lower income groups as it reflects changes in retail prices of 53 essential items accounting for more than 50 per cent expenses of the households with monthly income of Rs3,000 to Rs12,000.

The WPI shows changes in wholesale prices of 425 major items and it impacts heavily on both the CPI and the SPI with a time lag. A sharp increase in the SPI is indicative of the fact that the poorer sections of the population are being hit harder by inflation.

And a steep rise in the WPI warrants change in the monetary policy stance because historically low lending rates have provided the businessmen an opportunity to borrow money and indulge in hoarding of commodities.

Wheat hoarding, which was a key contributing factor in pushing up prices of wheat flour and its by-products to dizzying heights, can be cited as an example. The break-up of the 7.13 per cent increase in the CPI shows that the prices of food and beverage items registered the highest increase of 10.20 per cent in May 2004 over May 2003, followed by transport and communications (8.06pc) and house rent (7.64pc).