Economic Survey 2021: Inflation eases to 8.6% during July-April

June 10, 2021 (MLN): The headline inflation measured by the Consumer Price Index (CPI) was recorded at 8.6 percent during July-April FY2021 as against 11.2 percent during the same period last year.

The Economic Survey 2020-21 released today noted that inflation in perishable food items was increased by 0.1 percent against an exorbitant increase of 34.7 percent during the same period last year due to the government measures for maintaining price stability.

While, non-perishable food items are the main contributory factor in jacking up the food inflation in the Food and Non-alcoholic Beverages group, as it is recorded at 16.0 percent against the increase of 12.4 percent during the same period last year.

Among the non-perishable food items, the upward pressure came from the poultry group (chicken and eggs), followed by the staple group (wheat, wheat flour and edible oil). The increase in the poultry group may be attributed to viral disease which caused supply-side risks, it said.

The survey showed that wheat prices rose by more than 24 percent in April 2021 over April 2020 due to supply disruption. However, there was a decrease of 9 percent over March 2021 mainly due to the government efforts for a smooth supply of wheat. One of the measures was a timely release of wheat in the provinces by the procurement agencies and provision of the commodity via utility stores and fair price outlets which managed to ease price pressures.

Regarding the increase in the prices of edible oil, Palm oil and soybean prices have been on a steeply rising trajectory in the international markets since June 2020, amid sharp contractions in global inventory levels due to weather-related concerns in the major producing areas.

The Housing, Water, Electricity, Gas & other Fuel have recorded an increase of 5.7 percent during July-April FY2021 as against 7.1 percent during the same period last year. It has a weight of 23.6 percent thus any untoward movement directly affects the vulnerable segments of the society.

From the start of the current fiscal year, the government responded intensively and convened National Price Monitoring Committee (NPMC) meetings periodically to monitor the price situation as well as the supply of essential items. The committee remained vigilant and played a proactive role in removing the price disparity among the provinces.

The survey highlighted that the Core inflation, defined as Non-Food and Non-Energy (NFNE) inflation, continued to follow moderated trajectory due to containment of domestic demand and muted pass-through of higher food prices into core goods and services prices.

Globally, the inflation rate remained low during the pandemic but there is still an upside risk going forward. With substantial money-supply expansion throughout the major part of the world, low-interest rates and fiscal stimulus are building up inflationary pressure. Moreover, La Nina may intensify agriculture risk to farmers around the globe, which may cause a shortage of supply of various agriculture commodities, it added.

In Pakistan, the inflation rate remained low during the period July-April FY2021 as against the last year. The government is making efforts to bring down inflation by ensuring a smooth supply of commodities, checking profiteering & hoarding and vigilant monitoring of prices both at Federal and Provincial levels. In order to maintain a sufficient supply of wheat and sugar in the market, the publication underlined that the government intends to timely import the wheat and sugar to bridge the demand-supply gap. The government is also taking measures to provide incentives to the farmers for increasing agriculture production. In this regard, the government has already approved subsidy disbursement of Rs19.2billion for Kharif 2021 through provinces on sharing basis (75:25) for agriculture inputs.

The government has also focused on a medium and long-term strategy for raising the production of essential imported food items mainly edible oil and pulses. Thus, with these measures, associated risks of price hikes will be mitigated.

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Posted on: 2021-06-10T22:18:00+05:00