Stern action to address the price-hike

By Aftab Ahmad

Inflation is one of the most pressing economic problems faced by the citizens in recent times. It seems that there is no escape from the mounting prices of almost every item of daily use. But, the current price-hike can be made less agonising by curtailing prices of a few essential items that are of paramount concern to the majority of the poor masses.

The law of demand states that the demand for a commodity goes down if its price rises and vice versa. Thus, raising the price of a commodity by a supplier does not suit his financial goals, since higher prices would hit his sales level. However, ironically, increase in price does not always result in reduction in demand to the same extent, in case of each and every commodity. This is because the demand for luxuries such as automobiles or television is elastic and the same would go down significantly if the price surges. On the contrary, demand for necessities such as wheat flour or sugar is highly inelastic, with the result that demand would witness only a marginal decline or no decrease if the prices of these items go up. Hence, owing to this reason hoarders and profiteers lay much emphasis on these and similar commodities, knowing that the consumer has no choice but to buy them– despite the increase in the prices of these items.

Consumer demand falls into three categories, that is, necessities, comforts and luxuries. While luxuries do not add to efficiency or productivity, comforts do. Nevertheless one can keep their productivity level intact even without comforts. However, without meeting necessities such as food, clothing, shelter and healthcare etc, one’s productivity can not be maintained. It is, therefore, the duty of the state to ensure that necessities of life are available to the entire population at affordable rates.

Certain items have substitutes. For instance, pulse gram can be used as a substitute for pulse mash or pulse moong. If someone is unable to buy pulse mash or pulse moong because of high prices, they can do with pulse gram, which is relatively cheaper. Similarly, some vegetables are costlier than others. One could buy the vegetables that are relatively cheaper. Particularly, vegetable prices are higher in the beginning of the season and during the off-season. It would be wiser to keep our buying limited during the above-mentioned periods and purchase vegetables during the peak season, when the prices decline considerably due to abundant supplies.

Highly perishable commodities such as vegetables and fruits are generally available at reasonable prices during their peak season, since such commodities can not be hoarded. Though, prices of even these commodities go up on special occasions such as during Ramadan, since the short-term demand outstrips the temporary supply by a wide margin.  It would be wiser to purchase such items a few weeks in advance, which could save substantial amounts of money for consumers.

Experience shows that prices differ from one locality to another. Items of daily use are 15 to 25 per cent cheaper in localities inhabited by the poor as compared to highly developed areas occupied by the rich. Similarly, vegetables and fruits are sold 20 to 30 per cent cheaper in Sabzi Mandi, Friday and Sunday bazaars, as compared to retail markets in various posh localities. A large number of people visit the wholesale markets and Friday/Sunday bazaars frequently to buy grocery for their monthly consumption. By doing so, they save a lot of money, which they can spend for buying other items of daily use.

Thus, while consumers can make the best use of their limited income by keeping themselves informed about the price behaviour, it is also the duty of the government to ensure that items of daily use are available to the country’s entire population at affordable prices. During the last few years, while prices of necessary items had sky-rocketed, people’s income had not accelerated by the same proportion and there was a marked increase in the unemployment level. In such circumstances, the poor are experiencing the most grueling conditions in making their both ends meet.

In the first instance, while revising the support/procurement prices of agricultural crops, the democratic establishment should keep in mind the interests of the urban consumers also who are not growers and have to purchase items of daily use from the open market. During the last few years the procurement prices of wheat, rice and sugar-cane have escalated substantially, consequently pushing up the open market prices of wheat flour and sugar to the point where a large number of the underprivileged class finds consuming these items to be beyond their reach.

It is a renowned fact that hoarders, profiteers and smugglers are the main culprits behind the rising food inflation. Past experience has revealed that the best way to counteract the growth in prices of essential commodities is for the government to maintain sufficient stocks of these items. The leadership needs to plan wheat/sugar procurement and arrange funds for purchasing these items in advance, so that required quantities could be procured without any financing difficulties. In addition expanding the storage capacities is a must to fulfill the rising population’s needs. 

Last but not the least, the government has to take all the necessary steps to give an impetus to the production of agriculture items such as pulses, potatoes and oilseeds etc. There is no justification for an agricultural country like Pakistan to import such items in large quantities on a regular basis by spending its precious foreign exchange. As a matter of fact, Pakistan should have been able to export all these items and earn valuable foreign exchange. To combat inflation, the government will have to fight on various fronts. Bringing down food inflation to a lower level is fundamental not only to provide relief to the poorer sections of the society but, also, to achieve macroeconomic stability and put the economy on the right track.