Rising inflation & its impact on common people
THE squabbles in opposition and the unannounced agreement with TLP paved the way for government to settle the issues with IMF.
Petroleum prices have been raised by a record amount of 8.14 Pakistani rupees (PKR) per liter.The revised charges will go into effect immediately.
For the first time in Pakistan’s history, all petroleum products are priced above PKR 110 a liter.
According to government the relative petrol prices in Pakistan are still far less in this region.
As a layman it is difficult to understand and accept this claim.There are a few questions that come in mind automatically, for example, whether the per capita income is also the same?
Is the rate of inflation in other countries of this region also higher than us?Is the Consumer Price Index (CPI) indexing also higher in other countries of this region?
For this purpose it is inevitable to conduct a comparative analysis.According to the stats given by World Bank, the per capita income of Pakistan is less than Bangladesh, Bhutan, India, Maldives and Srilanka.
It is only higher than Nepal and Afghanistan.Per capita income of Bangladesh is 1,968.8, Bhutan is 3122.4, India is 1900.7, Maldives is 7455.9 and Srilanka is 3682.
To conduct the comparitive analysis it is important to know the CPI of the countries of this region as well (CPI s a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
It is calculated by taking price changes for each item in the pre-determined basket of goods and averaging them).
Again as per the figures given by the World Bank the CPI of Pakistan is higher than other countries of the region.
The CPI of Bangladesh is 189.9, Bhutan is 176.6, India is 184.3, Maldives is 134.7, Nepal is 198.3, Srilanka is 165.1 and the CPI of Pakistan is 200.1.
The price of petroleum is influenced by global pricing, and it is exogenous to a small economy like Pakistan.
When prices fluctuate, it has a major impact on CPI fluctuations both immediately and over several months.
Interestingly, as per the data given by World Bank the rate of inflation (Inflation is the rate of increase in prices over a given period of time.
Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country) in Pakistan is highest in the region.
As the rate of inflation of Bangladesh is 5.7, Bhutan is 5.6, India is 6.6, Maldives is -1.4, Nepal is 5.1, Srilanka is 6.2 and Pakistan is 9.7.
High and rising inflation disproportionately affects the poor and fixed-income groups, owing to the higher proportion of their wages spent on food.
Inflationary pressure has a significant impact on the life of all households.
Inflation is influenced by three types of causes: demand factors, supply factors and monetary shocks.
Monetary policy, fiscal policy, wage policy and seasonal considerations are all demand factors.
Weather, input costs, food production levels and changes in administered pricing are all supply-factors.
In Pakistan, the price of petroleum is one of the supply factors that causes inflation.
Petroleum has a significant part in Pakistan’s economy because it is widely used in our daily life, such as a source of fuel for automobiles and manufacturing machines.
It is also an important intermediate good in the manufacturing process.
Many articles in recent years have claimed that rising petroleum costs cause inflation in Pakistan.
—The writer is lecturer at DHA Suffa University, Karachi,