The headline inflation in Pakistan has accelerated to 9.04 percent in September 2020. This acceleration is faster than the 8.2 percent reading of August 2020. The most worrying fact about inflation is that rural inflation has increased much faster than urban inflation. Food inflation remained 14.74 percent against 12.89% of last month. The CPI basket reveals that on average each Pakistani spends 34.58% of his income on food and beverages therefore, this inflation has more dire consequences for a common man.
The share of food expenditure can vary between rich and poor. Poor household spend a major portion of their income on food items. An increase in food prices, therefore, erodes their ability to purchase essential goods for survival. Unstable food prices create malnutrition and starvation and contribute to poverty and low productivity. The provision of basic food items, therefore, should be the key responsibility and a focal point of the economic policy of the government.
The prices of all goods and services are determined by demand and supply forces. Government regulate this process and ensure that no seller with its monopoly power can manipulate this process. The supply of perishable commodities such as chicken, eggs and vegetables are very much sensitive to its prices. The supply and prices of theses commodities chase each other in the short run. The government, therefore, cannot regulate prices of theses commodities however, it should remove any bottleneck in the supply chain by curbing monopolies and hoarding. But, in case of wheat, oil and sugar whose production takes time to respond to the increased prices, the government has the critical responsibility of ensuring smooth supply throughout the year. Unfortunately, the present government has failedin this regard. In the last two years, wheat flour price has jacked up to 94% and sugar prices to 69%. Ironically, growers of wheat and sugarcane are not the beneficiary of this increased prices rather millers, middlemen and hoarders are actual profiteers. If growers have earned this money, they will be in a better position to increase the supply of these crops in the coming years. Moreover, the widespread distribution of increased prices among growers would have increased the aggregate demand for many industrial products.
A former wheat commissioner, Dr Aslam asserted that like sugar wheat also has become a political commodity. The potential businessman having political backing have been hoarding the wheat in huge quantity. They have political and economic powers to control the market and price. The price hike indicates the bottlenecks in the supply chain that the government is unable to break. Similarly, the government has failed to bring powerful mafias dealing in medicine, petrol in any framework.
The decision of the prime minister to outsource the basic function of the government: price watch to “Tiger Force” is an escape to his prime responsibilities. The government has shifted the whole burden of its economic policy to politically motivated volunteers who do not have formal training and credentials to tackle these complex issues. They even do not have legitimacy in the law to police the functions of the market. It is also questionable why this function is handed over to “Tiger Force” while a large administrative setup is existent. The monitoring of the prices is the basic responsibility of the district government and only they have magisterial power to take actions against profiteers and hoarders.
The government needs to revaluate its economic policy. It must make local price committees vibrant with clarity of command chain. The uncertainties in supply of major food items especially of wheat must be reduced. However, the impact of all measures of the government depends on the management of its perception and on its ability to mitigate the impact of ongoing economic recession. Moreover, instead of strengthening the “Tiger Force” the actual need is to strengthen the consumer societies, consumer courts and to generate awareness about consumer rights. These factors generate a natural resistance against the unjustified price hikes.