Prime Minister Imran Khan recently congratulated the nation for the decline in inflation to 5.7 percent in January 2021 against about eight percent in December 2020. That is no doubt a remarkable achievement yet the prime minister’s optimism hasn’t been reflected in the wider public mood so far. And that is because even though the Pakistan Bureau of Statistics (PBS) says everybody should be happy because its data has recorded a drop in prices, people’s experience at the markets is quite different and each additional rupee that they spend continues to experience erosion in its purchasing power. It won’t be long now before the data used by the government is called into question. Even if the integrity of that data cannot be questioned, even though Federal Minister Hafeez Sheikh and Special Advisor to PM Razzaq Dawood have only recently expressed doubts about the quality of the data used by PBS, the government could still have toggled the basket of goods it considers while measuring consumer price inflation. And the fact of the matter is that even as government officials have been celebrating the alleged reduction in prices, food inflation has visibly increased; especially in rural areas. That explains why the PM is in such a rush to control food prices. In one fell swoop, even after the good news about inflation, he dissolved market committees in the two provinces that PTI is in power because they appeared so helpless during last year’s market price crisis. Instead, he’s ordered the formation of new bodies that will consist of people with integrity who will be tasked with ensuring that price lists are implemented at all times.
These steps are no doubt very well intentioned, and the PM is right in thinking about the bread basket of the common man, but he might soon find himself in need of people with more than just good reputations to get a handle on the artificial price hike in some very essential items like sugar and wheat. Market committees that failed to do their job properly last year were also mandated with doing just these things. But the many reasons for food inflation at the time had more to do with the factors that are involved in demand-supply dynamics of most kitchen items than the integrity of monitoring officials. And in sugar and wheat, especially, problems arose long before either commodity hit the market and started when the government itself delayed announcement of support prices which forced farmers to opt for other crops. Then, particularly in the case of sugar, politically connected mill-owners were able to declare an artificial supply surplus in the country, even use their influence to get export subsidies, till it turned out that there wasn’t enough left for domestic use and a lot of it had to be imported at very high cost. Wheat farmers, too, recorded one of their worst experiences as the government did nothing about the threat from locusts till it was clearly too late.
Then, when middlemen started influencing prices to the upside, the PM promised time and again to use all the might of the state to catch and punish all those responsible for the artificial rise, yet despite the odd downturn inflation has stayed pretty high for most of PTI’s tenure so far. Now the opposition is attributing January’s 5.7 percent figure to manipulation as well as a very visible slowdown in growth because of the coronavirus. When growth is low, prices also tend to be low, but the fact that food is still expensive ought to ring serious alarm bells for the government.
It’s a very welcome sign that the prime minister is taking such active interest in this problem. But rather than forcing the market to follow price lists, a better way to approach it would be making sure that demand dynamics and supply chains are taken care of. Then any hoarding that takes place will become much easier to identify and handle. Inflation is, after all, the cruelest of all taxes and squeezes the middle and lower income classes the most. Hopefully the government will implement the right reforms at the earliest and relieve the common man of this unfair burden.
