Double edge sword
Contrary to the expectations of the people in general and independent economists in particular, the PTI government could not unfold an innovative and pragmatic economic policy with across the board tax and tariff reforms much needed measures for latest technology induction in the industrial sector to make it competitive. The adhoc measures of preferential gas and electricity tariff to certain export industries which are still operating on second generation technology will have limited impact on the revival of the economy plagued by stagflation.
Greater reliance on regressive fiscal measures has further sharpened the double edge sword of inflation cutting into the roots of the economy and accentuating the miseries of people of middleclass and lower strata of the society. Evaluated on the basis of both yardsticks of Consumers Price Index (CPI) and Cost of Living Index (CLI) the inflation rate has gone up to 56 months high of 8.21 percent as per the data released by Pakistan Bureau of statics (PBS). The actual rate of inflation may be higher the conservative official estimation. This time the prices of essential commodities of daily consumption have shown a tremendous increase including the perishable ones like vegetables and fruits.
Currency depreciation by 32 percent against the US dollar and other major global currencies, irrational increase in the prices of petroleum products despite the continuous fall of crude oil in the international market, consecutive hikes in power tariff and unprecedented raise in gas tariff have contributed to the current trend of galloping inflation. Core inflation has grown to 8.81 percent to which the independent economists give more importance over the CPI and CLI inflation.
The free float rupee of against dollar and other hard global currencies has not brought significant improvement in exports as the exports manufacturing industry consume bulk of the imported raw material and intermediate goods which have become expensive in dollar terms eliminating the whatever comparative advantage is still left. The lingering crisis of agriculture sector has made the country dependent on imports of vegetables of daily consumption the prices of which are constantly soaring. There are no signs that the government is working on the formulation of viable policies to give impetus to productivity growth in the agriculture and industrial sectors. High quality seeds are not evolved in agriculture research centers and small farmers cannot afford the purchase of genetically modified imported seeds. The inputs like fertilizers, pesticides and insecticides are very expensive. Hence, per acre yield remains very low. Induction of imported latest generation technologies and their indegenisation is constantly ignored with the result that local brands of consumers’ goods are more expensive than the identical foreign made goods. Unless and until the productive capacity of these sectors is enhanced the hydra-headed monster of inflation cannot be brought under control.