FeaturedNationalVOLUME 16 ISSUE # 13

Inflation: Early celebrations?

Prime Minister Imran Khan has claimed that his government’s concerted efforts for bringing prices down have started bearing fruit and inflation has slowed down in January to below the July 2018 level. However, the ground reality is different from the statistics and essentials are still out of the reach of the common people.

Prices of some vegetables and fruits have come down in recent months after fresh supplies arrived in the market but cooking oil, sugar and flour prices are still high. Prices are also set to rise steeply after the government has announced a Rs1.95 per unit increase in electricity rates and hiked prices of all petroleum products by 2.5pc to 4.6pc for the next 15 days on February 1, for the fifth fortnight in a row. According to an announcement by the Prime Minister Office, ex-depot prices of high speed diesel and petrol were increased by Rs2.88 and Rs2.70 per litre, respectively. The prices of kerosene and light diesel oil were jacked up by Rs3.54 and Rs3per litre, respectively. The hikes in power and fuel prices will push up rates of all essentials and commodities in the coming weeks.

According to Prime Minister Imran Khan, the Consumer Price Index and core inflation are decreasing in the country. “More good news on the economic front. Our efforts to reduce inflation are now showing results. The Consumer Price Index and core inflation are both now lower than when our government was formed. I have told my economic team to stay vigilant and ensure that inflation stays under control,” he said in a Twitter post. Federal Minister for Planning and Development Asad Umar also announced that inflation was on the downward trajectory. “Inflation continues to decline. January inflation (CPI) is down to 5.7pc. Core inflation is at 5.4pc. Last month (Jul 2018) prior to the PTI government formation, the CPI was 5.8pc and core was 7.6pc. The rate of inflation is lower today than when the PTI government was formed.”

According to the Pakistan Bureau of Statistics (PBS), the Consumer Price Index (CPI) recorded an increase of 5.7pc on a year-on-year basis in January 2021, as compared to an increase of 8pc in the previous month and 14.6pc in January 2020. The statistics show a reduction in prices of some vegetables, eggs and chicken helped bring down the CPI. On a month-on-month basis, the CPI decreased by 0.2pc in January 2021, as compared to a decrease of 0.7pc in the previous month and an increase of 2pc in January 2020. The January 2021 CPI decreased by 0.21pc over December 2020, and increased by 5.65pc over the corresponding month of the last year i.e. January 2020.

Urban inflation increased by 5.03pc on a year-on-year basis in January 2021, as compared to an increase of 7pc in the previous month and 13.4pc in January 2020. On a month-on-month basis, it decreased by 0.2pc in January 2021, as compared to a decrease of 0.3pc in the previous month and an increase of 1.7pc in January 2020. Rural inflation increased by 6.6pc on a year-on-year basis in January 2021, as compared to an increase of 9.5pc in the previous month and 16.3pc in January 2020. On a month-on-month basis, it decreased by 0.3pc in January 2021, as compared to a decrease of 1.2pc in the previous month, and an increase of 2.4pc in January 2020. The Sensitive Price Index inflation on YoY increased by 7.7pc in January 2021, as compared to an increase of 9.1pc a month earlier, and an increase of 18.3pc in January 2020. According to the data, sugar prices increased by 14.76pc, mustard oil 10.18pc, wheat 8.17pc, vegetable ghee 6.06pc, fruits 5.39pc, cooking oil 3.28pc, fresh milk 2.46pc, moong 2.02pc and fish 1.64pc while potato prices decreased by 33.57pc, tomatoes 30.03pc, chicken 28.48pc, onions 24.87pc, eggs 15.39pc, vegetables 10.14pc and spices 7.54pc on a month-on-month basis.

An analysis of the data shows the prices of all component items in the CPI declined in January 2021, as compared to December 2020, other than food and non-alcoholic beverages. Within the group too, prices of non-perishable items registered a rise in both rural and urban centres. There was a massive decline in the price indices of perishable items, from 158.5 in December 2020, to 128.98 in January 2021, in urban centres, and from 164.99 in December 2020, to 129.31 in January 2021, in rural areas. It brought down the CPI by a whopping 2.3 percentage points in January 2021, as compared to December 2020.

Though the pace of price hikes of goods and services has been decelerating for the past few months and the CPI and core inflation have dropped to their lowest level at 5.7pc and 5.4pc, respectively, in January in more than two years, yet it does not mean that prices have dropped to the 2018 level, when the PTI had come to power. The latest data just shows that prices are stabilising to some extent, for the first time in the government of Prime Minister Imran Khan, after inflation jumped to 14.6pc in January 2020, its highest level in more than nine years.

The CPI has risen by a cumulative 8.3pc in the first seven months of the current fiscal year despite a considerable deceleration in the January inflation rate. It is feared that the present relief may not last long and prices will start rising again in the wake of a 17pc increase in electricity tariffs and persistent fuel price hikes. Rates of wheat, flour, cooking oil and sugar have already started rising. The government will have to cut power and fuel prices to provide permanent relief to people from rising prices.

Share: